My barn is dead center in the above picture
and the golf club house is to the left.
We had some thawing a couple of weeks ago
--- Hated it!
Now we have deep snow --- Love not having to worry about hurricanes.

America, what is happening to you?“One thing seems probable to me,” said Peer Steinbrück,
the German finance minister, in September 2008....“the United States will lose
its status as the superpower of the global financial system.” You don’t have to
strain too hard to see the financial crisis as the death knell for a
debt-ridden, overconsuming, and underproducing American empire . . . Richard Florida, "How the Crash Will
Reshape America," The Atlantic, March 2009 ---
http://www.theatlantic.com/doc/200903/meltdown-geography

I started saving up in the barn to buy a new
snow shovel in about six years.

The government gave them 105% for their
$200,000 subprime mortgage.
They then sold the house for $37,000, got married, and are escaping from
California.

So are we now that we flipped the doghouse!

Governor Duval Patrick is proudly displaying
the new scarlet letter that is legally required for all
Massachusetts residents when paying cash outside their home state. Sales tax
collection and
remittance treaties are being forged with the other 49 states and all
international jurisdictions
Click Here
His state-owned Caddy can then be upgraded to a Lamborghini.

Sunrise, sunset (above when looking east).
How swiftly go the days.
My neighbor no longer has this beautiful white mare that I miss.

Below is the golf course in a different
season.

At least we don't have hurricanes. But we do
have gale force winds.
Below is an ancient maple tree blew down last summer next to a
an inn down our road known as the Homestead.

On May 14, 2006 I retired from Trinity University after a long
and wonderful career as an accounting professor in four universities. I was
generously granted "Emeritus" status by the Trustees of Trinity University. My
wife and I now live in a cottage in the White Mountains of New Hampshire ---
http://www.trinity.edu/rjensen/NHcottage/NHcottage.htm

Online Video, Slide Shows, and Audio
In the past I've provided links to various types of music and video available
free on the Web.
I created a page that summarizes those various links ---
http://www.trinity.edu/rjensen/music.htm

Video of an Accounting Researcher
Accounting Professor
John Hughes
(Ernst & Young accounting professor at UCLA)
Four Minute Video: Does Information Asymmetry Affect the
Cost of Capital?
Video:
http://www.anderson.ucla.edu/documents/areas/adm/web/vid_JHughes.html
Paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=488203
Jensen Comment
With some rather innocent sounding assumptions, Modigliani and Miller, in a
famous ground breaking study, showed that the amount of leverage is
cost-of-capital neutral when making decisions to issue debt versus equity. I
think the current collapse of large and highly leveraged banks brings market
efficiency assumptions into question. In particular the moderating effect of
cash traders depends upon deep markets that often just do not exist when
insiders are either bailing out big time or jumping in deep based upon
information asymmetry in inefficient markets. As with all empirical model
findings, the assumptions should be severely analyzed. Also in the present
economic crisis cost-of-capital expectations are all messed up when and if Uncle
Sam interferes in the private markets. The Treasury Department will most
certainly demand less information asymmetry before deciding how much to help
troubled banks.

America, what is happening to you?“One thing seems probable to me,” said Peer Steinbrück,
the German finance minister, in September 2008....“the United States will lose
its status as the superpower of the global financial system.” You don’t have to
strain too hard to see the financial crisis as the death knell for a
debt-ridden, overconsuming, and underproducing American empire . . . Richard Florida, "How the Crash Will
Reshape America," The Atlantic, March 2009 ---
http://www.theatlantic.com/doc/200903/meltdown-geography

A democracy cannot exist as a permanent form of
government. It can only exist until the voters discover that they can vote
themselves largesse from the public treasury. From that moment on, the majority
always votes for the candidates promising the most benefits from the public
treasury, with the result that a democracy always collapses over loose fiscal
policy, always followed by a dictatorship.Alexander Tyler. 1787 - Tyler was a Scottish history professor that had
this to say about 2000 years after "The Fall of the Athenian Republic" and about
the time our original 13 states adopted their new constitution.
As quoted at
http://www.babylontoday.com/national_debt_clock.htm (where the debt clock in
real time is a few months behind)The National Debt Amount This Instant (Refresh your browser for
updates by the second) ---
http://www.brillig.com/debt_clock/

You cannot legislate the poor into freedom by
legislating the wealthy out of freedom. What one person receives without working
for, another person must work for without receiving. The government cannot give
to anybody anything that the government does not first take from somebody else.
When half of the people get the idea that they do not have to work because the
other half is going to take care of them, and when the other half gets the idea
that it does no good to work because somebody else is going to get what they
work for, that my dear friend, is about the end of any nation. You cannot
multiply wealth by dividing it.Ronald
ReaganJensen Comment
In a desperate attempt to propose a profit plan, GM and the United Auto Workers
now advocate taxpayer funding for retiring workers in GM at age 48 and over. If
GM instead goes bankrupt, taxpayers may end up funding existing retirees over
age 65, but the younger workers may actually have to accept lower wages in a
restructuring plan for GM. That means they would have to keep on working for a
living but accept Toyota-like non-union wage rates which are less than the UAW
$70 per hour average.

It is apparent that we've learned nothing from
several millennia of monetary destruction. The persistent demonstration that
capital, not paper, is the basis for prosperity has fallen on deaf ears. Daily,
we face the sad spectacle of government officials, pundits, and even Nobel
laureates (read that Paul Klugman from the Zimbabwe School of
Finance) telling us that printing money is the answer
to an economic downturn.
"Printing Like Mad," Mises Economic Blog, February 15, 2009 ---
http://blog.mises.org/archives/009457.asp
For more details see
http://www.trinity.edu/rjensen/2008Bailout.htm#Revolution

My choices early in life were either to be a piano
player in a whorehouse or a politician. And to tell the truth, there's hardly
any difference."Harry Truman

Let Wall Street get a nightmare, and the whole
country has to help get them to bed again.Will Rogers

The prudent capitalist will never adventure his
capital . . . if there exists a state of uncertainty as
to whether the Government will repeal tomorrow what it has enacted today.Former President
William Henry Harrison

Russian Prime Minister Vladamir Putin has
said the US should take a lesson from the pages of Russian history and not
exercise “excessive intervention in economic activity and blind faith in the
state’s omnipotence”.

“In the 20th century, the Soviet Union
made the state’s role absolute,” Putin said during a speech at the opening
ceremony of the World Economic Forum in Davos, Switzerland. “In the long
run, this made the Soviet economy totally uncompetitive. This lesson cost us
dearly. I am sure nobody wants to see it repeated.”[Snip.]

Sounding more like Barry Goldwater than
the former head of the KGB, Putin said, “Nor should we turn a blind eye to
the fact that the spirit of free enterprise, including the principle of
personal responsibility of businesspeople, investors, and shareholders for
their decisions, is being eroded in the last few months. There is no reason
to believe that we can achieve better results by shifting responsibility
onto the state.”

Putin also echoed the words of
conservative maverick Ron Paul when he said, “we must assess the real
situation and write off all hopeless debts and ‘bad’ assets. True, this will
be an extremely painful and unpleasant process. Far from everyone can accept
such measures, fearing for their capitalization, bonuses, or reputation.
However, we would ‘conserve’ and prolong the crisis, unless we clean up our
balance sheets.”

The government should create, issue, and circulate
all the currency and credits needed to satisfy the spending power of the
government and the buying power of consumers. By adoption of these principles,
the taxpayers will be saved immense sums of interest. Money will cease to be
master and become the servant of humanity.Abraham Lincoln (I wonder why this
just does not work in Zimbabwe?)

Ruth was just due to get her hair and nails done: That's not suspicious
or anything
Ruth Madoff Withdrew $15.5 Million From Madoff Brokerage Before Bust Joe Weisenthal, The
New York Times, February 11, 2009 ---
Click Here

Question: What's $2+$3,269,999,999,998?
Accountant What would you like it to total? We strive to keep our clients
happy.
Politician: I voted for $789,000,000 but I've never been real good with big
numbers having lots of commas.
Economist: Why it's 33 Yen in terms of the anticipated foreign
exchange rate ten years from now.
Congressional Budget Office: $3,270,000,000,000 --- but please don't tell on us

All of the major news outlets are reporting that
the stimulus bill voted out of conference committee last night has a meager $789
billion price tag. This number is pure fantasy. No one believes that the
increased funding for programs the left loves like Head Start, Medicaid, COBRA,
and the Earned Income Tax Credit is in anyway temporary. No Congress under
control of the left will ever cut funding for these programs. So what is the
true cost of the stimulus if these spending increases are made permanent? Rep.
Paul Ryan (R-WI) asked the Congressional Budget Office to estimate the impact of
permanently extending the 20 most popular provisions of the stimulus bill. What
did the CBO find? As you can see from the table below, the true 10 year cost of
the stimulus bill $2.527 trillion in in spending with another $744 billion cost
in debt servicing. Total bill for the Generational Theft Act: $3.27 trillion.
"True Cost of Stimulus: $3.27 Trillion," Heritage Foundation, February 12,
2009 ---
http://blog.heritage.org/2009/02/12/true-cost-of-stimulus-327-trillion/
Also see
http://www.newsmax.com/headlines/stimulus_bill_pork/2009/02/14/181864.html
Jensen Comment
The above article has a pretty good summary table --- the best that I've seen to
date.
The Big Spenders ---
http://www.americanthinker.com/2009/02/who_are_the_big_spenders.html

But wait, there's $3.3 trillion more
more!Disagreeing with Roubini (about nationalizing the
banks) has not been rewarding. He predicted the current economic collapse with
precision long before most economists. His forecasts for the next year or so
seem reasonable and are widely viewed as a good road map for what is likely to
be ahead for GDP and employment. However, he may not be right with his estimate
that total banks write-offs due to toxic financial instruments sold by U.S. will
be about $3.3 trillion worldwide. That is well above projections by most
economists and the IMF. Nationalization of U.S. banks would cause hundreds of
billions of dollars of losses to the common and preferred stockholders in the
firms. This, in turn, could cause the failure of some investment funds that hold
those shares."The Case for Nationalizing the Entire Economy," Time Magazine,
February 16, 2009 ---
http://www.time.com/time/business/article/0,8599,1879745,00.html
Jensen Comment
After the disaster experience in Japan, I think it's best to just let the banks
fail that are going to fail. Many companies rise up after declaring bankruptcy
and reorganization. This will be painful for shareholders, including investment
funds that hold shares, but such is the risk of equity investing.

But many experts predict that the current crisis may
trump tradition. Two large American banks are especially at risk: Citigroup,
which received a $300 billion federal aid package -- mostly in the form of loan
guarantees late last year -- and Bank of America, the beneficiary of a similar
$120 billion program earlier this year. Many experts believe the two bailouts,
despite the massive amounts of money involved, did little to take the banks away
from the edge of insolvency, and the federal government can take little further
action without becoming the majority stakeholder. They note that Washington is
already seeking to impose strict controls without ownership, such as the limits
on executive pay that Congress included in the recent economic stimulus bill.
"Has the Time Come to Nationalize Struggling Banks? Yes, but
Carefully," University of Pennsylvania's knowledge@wharton, February 18, 2009
---
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2166

Reporting from the Chicago commodity pits, my CNBC
colleague Rick Santelli unleashed a torrent of criticism against this scheme.
Santelli said: “Government is promoting bad behavior. . . . Do we really want to
subsidize the losers’ mortgages? This is America! How many of you people want to
pay for your neighbor’s mortgage? President Obama, are you listening? How about
we all stop paying our mortgages! It’s a moral hazard.” All this took place on
the air, to the cheers of traders. Santelli called for a new tea party in
support of capitalism. He’s right.
Eric Eheridge, Rick Santelli: Tea Party Time, The Opinionator,
February 20, 2009 ---
http://opinionator.blogs.nytimes.com/2009/02/20/rick-santelli-tea-party-time/Jensen Comment
If there must be a program to keep people living in homes that would otherwise
be foreclosed, why not lend these homeowners the funds they need to keep living
in their homes. But the Federal Government should place a lien on the house
title that says the emergency loan given to homeowners must be repaid if the
property is sold or the owners die. That way a an unemployed homeowner cannot
simply make thousands of of dollars from a quick sale to pay for a fabulous
short term lifestyle (perhaps buying expensive narcotics) and then end up in
public housing. This lien-plan would let homeowners remain in their homes and
pay nothing on their mortgages until they have the incomes to repay the
government and eventually make some profit above what is still owing on their
emergency loan. Why should we reward this bad behavior by letting them sell
their homes and keep all the proceeds as a reward for bad behavior when they
agreed to mortgages they knew they could never pay off or ignorant behavior for
signing fraudulent loans. What we are otherwise doing is building massive fraud
on top of the massive fraud we have at the moment.
Update: After his rant on the trading floor, President Obama invited Rick
Santelli to the Whitehouse ---
Click Here

Barney believes the tooth fairy will
repay the U.S. Treasury!While the Federal Reserve has provided $1.95 trillion
to troubled banks and other financial institutions, "Almost all of that is
coming back," Frank said. "I think we should make a distinction between hundreds
of billions spent on the TARP [Troubled Assets Relief Program] and the hundreds
and hundreds of billions spent on the war in Iraq which isn't coming back. I am
struck by the selectivity with which we worry about expenditures."
Dave Cook, "Barney Frank: Happy ending possible despite economic mess,"
CBMonitor, February 16, 2009 ---
http://axcessnews.com/index.php/articles/show?id=17541

The Czech Republic will offer a free plane ticket
and 500 euros ($649) to foreign workers who voluntarily agree to return home
after losing their jobs in the economic downturn, the government said on Monday.
The sweeteners are among measures to cope with security risks stemming from
rising unemployment among foreign workers in the EU member country, Interior
Minister Ivan Langer said. "Czech Republic to pay unemployed foreigners to go home,"
Reuters, February 9, 2009 ---
Click Here
Jensen Comment
If the U.S. gave such a deal to go home south of the Rio Grande, recipients
would be back north of the river in a week.

Gasp: Corny Exhaust Can Be Harmful to LungsSwitching from gasoline or corn-based biofuels to
cellulosic ethanol--made from the stalks and stems of plants--could have more
health and environmental benefits than previously recognized, according to a
study of different types of transportation fuels. The environmental and health
costs associated with cellulosic ethanol are less than half those of gasoline
and of corn ethanol, the study found. Anna Davison, MIT's Technology
Review, February 17, 2009 ---
http://www.technologyreview.com/energy/22089/?nlid=1782
Jensen Comment
I hope Al Gore gets a big whiff of this.

Indeed it might not be worth breaking a sweat if the
stimulus bill was going to spend the measly $168 billion that George Bush's tax
rebates threw at the economy last year. Nobody gets upset anymore if Washington
wastes a hundred billion dollars. But coming after four months of the TARP's
dizzying billions spent in futility, we get a president proposing to spend
nearly $1,000,000,000,000 on what he calls "stimulus." Even a populace numb to
its government's compulsive spending woke up to that fantastic sum. . . .
The whole congressional effort is an irrelevant sideshow; only the final
spending number matters. The economics don't matter, because the real political
purpose of the bill is to neutralize this issue until the economy recovers on
its own. Much of its spending is a massive cash transfer to the party's union
constituencies; a percentage of that cash will flow back into the 2010
congressional races. The bill in great part is a Trojan horse of Democratic
policies not related to anyone's model of economic stimulus. Finally, if this
bill's details are irrelevant to the presumed multiplier effect of an $800
billion Keynesian stimulus, GOP Sen. Susan Collins's good-faith participation in
it looks rather foolish. Daniel Henninger, "Exactly How Does
Stimulus Work? Separating economics from theatrics," The Wall Street Journal,
February 12, 2009 ---
http://online.wsj.com/article/SB123440338832275537.html?mod=djemEditorialPage

Thain Pain:
Merrill Lynch Bonuses of Over $1 Million to Each of 696 Executives
Rewarded for making their company so profitable for shareholders? (Barf Alert!)Merrill Lynch quietly paid out at least one million
dollars bonus each to about 700 top executive even when the investment house was
bleeding with losses last year, a probe has revealed. They were part of 3.6
billion dollars in the firm's bonus payments in December before the announcement
of its fourth quarterly losses and takeover by Bank of America, the
investigation by the New York state Attorney General's office showed. "696
individuals received bonuses of one million dollars or more," New York Attorney
General Andrew Cuomo said of the Merrill scandal in a letter to a lawmaker
heading the House of Representatives financial services committee. "Merrill bonuses made 696 millionaires: probe," Yahoo News,
February 11, 2009 ---
http://news.yahoo.com/s/afp/20090211/bs_afp/usbankingjusticeprobecompanymerrillbofa_20090211201133

I think the FBI may be hiringThe FBI is conducting more than 500 investigations
of corporate fraud amid the financial meltdown, the bureau's deputy director
told a Senate panel Wednesday. Deputy Director John Pistole also said 38 of the
530 total active corporate fraud investigations involve fraud and financial
institution matters directly related to the economic crisis. Additionally, the
FBI has more than 1,800 mortgage fraud investigations, more than double the
number of such cases just two years ago. There are so many mortgage fraud cases,
Pistole said, that the bureau is not focusing on individual purchasers, but
industry professionals generating fraud schemes that could total... "FBI Probing 530 Corporate Fraud Cases," Fox News,
February 11, 2009 ---
http://www.foxnews.com/politics/2009/02/11/fbi-probing-corporate-fraud-cases/
Jensen Comment
Looks like Marvene may be off the hook ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze

At the Airport With $70,000 in his shoes
An American fugitive accused in a $100-million (U.S.) mortgage fraud was caught
at the Canadian border after taking a taxi from Toronto with $1-million in Swiss
bank certificates and $70,000 stuffed in his shoes, authorities said Wednesay.
Authorities said Christopher Warren also was carrying four ounces of platinum
valued at more than $1,000 an ounce when he was arrested entering the United
States at Buffalo, N.Y., before midnight Tuesday. Mr. Warren is the second of
three fugitives to be caught in the investigation of Loomis Wealth Solutions, an
investment company based in Roseville, Calif., and several related companies.
Court documents say they had defrauded investors and mortgage companies of
$100-million since 2006. The deals involved 500 homes and condominiums in
California, Florida, Nevada, Illinois, Colorado and Arizona, Internal Revenue
Service affidavits said. Mr. Warren admits his guilt in an essay appearing
online, and blames himself and his colleagues for helping to cause the U.S.
financial meltdown by creating hundreds of millions of dollars in fraudulent
mortgages that went bad. "Fugitive financier arrested at U.S. border," The Globe and
Mail (Canada), February 12, 2009 ---
http://www.theglobeandmail.com/servlet/story/RTGAM.20090212.wfugitive12/BNStory/International/home?cid=al_gam_mostview
Bob Jensen's threads on the sleaze of fraudulent mortgage lending ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze
Read about poor Marvene ---
http://www.trinity.edu/rjensen/FraudMarvene.htm
How you can adopt Christopher Warren --- ----
http://www.youtube.com/watch?v=qDC0qcf0kzE

Long Time WSJ Defenders of Wall Street's Outrageous Compensation Morph
Into HypocritesAt each stage of the disaster, Mr. Black told me --
loan officers, real-estate appraisers, accountants, bond ratings agencies --
it was pay-for-performance systems that "sent them wrong." The need for new
compensation rules is most urgent at failed banks. This is not merely
because is would make for good PR, but because lavish executive bonuses
sometimes create an incentive to hide losses, to take crazy risks, and even,
according to Mr. Black, to "loot the place through seemingly normal
corporate mechanisms." This is why, he continues, it is "essential to
redesign and limit executive compensation when regulating failed or failing
banks." Our leaders may not know it yet, but this showdown between rival
populisms is in fact a battle over political legitimacy. Is Wall Street the
rightful master of our economic fate? Or should we choose a broader form of
sovereignty? Let the conservatives' hosannas turn to sneers. The market god
has failed.Thomas Frank, "Wall Street Bonuses Are an Outrage: The public
sees a self-serving system for what it," The Wall Street Journal,
February 4, 2009 ---
http://online.wsj.com/article/SB123371071061546079.html?mod=todays_us_opinionBob Jensen's threads on outrageous compensation are at
http://www.trinity.edu/rjensen/FraudConclusion.htm#OutrageousCompensation

SEC = Suckers Endup CheatedDavid Albrecht, Bowling Green University"

In 2007, The Harris Poll found that fully 71% of the
public who understood what the Securities and Exchange Commission (SEC) did
rated the job it was doing positively (i.e., excellent or pretty good). A new
Harris Poll finds that only 29% of all adults now give the SEC positive ratings,
a huge drop of 42 points. Almost three-quarters (71%) give the SEC negative
ratings.
"Positive Rating of SEC Plunges 42 Points," SmartPros, February 16, 2009
---
http://accounting.smartpros.com/x65448.xml
Much of this fall is the fault of the worst SEC Director in History ---
http://www.trinity.edu/rjensen/2008Bailout.htm#SEC

At last the cause of the forest fires in Australia and California is revealedThe religious group that condemned Heath Ledger to hell
for his role in Brokeback Mountain, is back – this time attacking the victims of
the Victoria fires. The Westboro Baptist Church – founded by Reverend Fred
Phelps in Topeka, Kansas - claims that sinning Australians are the cause of the
bushfires that raged across Victoria, and plan to picket the national day of
mourning on February 22. In a statement, the group says “God hates Australia”
and “thank God for the fiery deaths of hundreds”. “The guilty Australians will
not repent of their national sins of the flesh … even after God killed hundreds
in the fires and cast them into hotter fire and brimstone in hell,” it says. The
controversial church - whose core belief is that God will punish those who
support homosexuality - has previously had its sights on Australia, slamming The
Dark Knight star Heath Ledger for his role as a gay cowboy in Brokeback Mountain
and protested at the late actors memorial services in the US. Ian Rokowski, "Westboro Baptist
Church attacks victims of Victoria bushfires, plans mourning day picket,"
Australia's News.com ---
http://www.news.com.au/story/0,27574,25067362-2,00.html
Jensen Comment
But how do we explain the tornados in Kansas?

Alcalde & Fay partner Vicki Iseman has settled her
$27 million defamation lawsuit against The New York Times and several of its
reporters. Iseman, a Washington lobbyist, sued the Times over a story published
last February during the presidential campaign season that she claimed
inaccurately depicted her as having an affair with Republican candidate Sen.
John McCain. Iseman says, "I am pleased that The New York Times on behalf of its
reporters, editors and company has issued a retraction and clarification."
Iseman’s statement continues, "The New York Times, its reporters and editors,
should and must be held accountable when their investigations, reporting, and
written words migrate from legitimate to illegitimate with the affect of
destroying human beings based on innuendos, rumors and the reckless attributions
of 'anonymous sources.'"Marisa McQuilken, "New York Times
Settles With Lobbyist Over McCain (Affair) Story," New York Lawyer,
February 20, 2009 --- Click Here

The Obama Administration is expected within the next
few weeks to announce an initiative of $50 billion (which
Barney Frank honestly claims is not near enough) or more to help strapped
homeowners. But with 1 million residences having fallen into foreclosure since
2006, and an additional 5.9 million expected over the next four years, the Obama
plan—whatever its details—can't possibly do the job by itself. Lenders and
investors will have to acknowledge huge losses and figure out how to keep
recession-wracked borrowers making at least some monthly payments. So far the
industry hasn't shown that kind of foresight. One reason foreclosures are so
rampant is that banks and their advocates in Washington have delayed, diluted,
and obstructed attempts to address the problem. Industry lobbyists are still at
it today, working overtime to whittle down legislation backed by President Obama
that would give bankruptcy courts the authority to shrink mortgage debt.
Lobbyists say they will fight to restrict the types of loans the bankruptcy
proposal covers and new powers granted to judges. Brian Grow, Keith Epstein and Robert Berner,
"How Banks Are Worsening the Foreclosure Crisis How the banking industry is
undermining efforts to keep people in their houses," Business Week,
February 12, 2009 ---
http://www.businessweek.com/magazine/content/09_08/b4120034085635.htm?link_position=link2

Re-arranging the deck chairs on the USS SECWe understand why Ms. Schapiro would want to show some
love to the staff after the blistering attack it received last Wednesday on the
Hill. Said liberal New York Congressman Gary Ackerman, "You have totally and
thoroughly failed in your mission." Then he went negative, referring to the
SEC's difficulty in finding a part of the human anatomy "with two hands with the
lights on." Mr. Markopolos added that his many interactions with the agency "led
me to conclude that the SEC securities' lawyers, if only through their
investigative ineptitude and financial illiteracy, colluded to maintain large
frauds such as the one to which Madoff later confessed." . . . If Ms. Schapiro
seeks to learn from the SEC's recent history, she might start by considering the
most basic lesson from the Madoff incident. Private market participants spotted
the fraud, while SEC lawyers couldn't seem to grasp it. Rather than giving her
staff lawyers still more autonomy, she should instead be supervising them more
closely, while trying to harness the intelligence of the marketplace. Meantime,
investors should remember that their own skepticism and diversified investing
remain their best defenses against fraudsters. "Just Don't Mention Bernie: Unleashing the SEC enforcers
who were already unleashed," The Wall Street Journal, February 10, 2009
---
http://online.wsj.com/article/SB123423071487965895.html?mod=djemEditorialPageAlso see "High "Power Distance" at the SEC: Why Madoff Was Allowed to
Take Investors Down with Him," by Tom Selling, The Accounting Onion,
December 10, 2009 ---
http://accountingonion.typepad.com/theaccountingonion/2009/02/high-power-dist.html

I don't
think we in the U.S. are as low a power
distance society as we fashion
ourselves, and the redistribution of
wealth that has been occurring since the
1980s may be pushing us inexorably
towards Colombia. Also, it wasn't
difficult for me to think of a few
examples of where the SEC in particular
has been exhibiting symptoms
characteristic of a high power distance
country:

When asked why
he robbed banks, Willie Sutton
simply replied, "Because that's
where the money is." Lately, it
seems that the SEC staff (i.e., the
"co-pilots,") has shied away from
the big money, out of a mirror-image
version of the self-interest
(survival, in case of a staff
member) that motivated Mr. Sutton.
And that fear is not merely
paranoia, as tangibly illustrated
recently when a former SEC
investigator was
fired
after pursuing evidence that John
Mack, Morgan Stanley's CEO,
allegedly had tipped off another
investment company about a pending
merger.

The
Christopher Cox administration
instituted an unprecedented policy
that required the Enforcement staff
to obtain a special set of approvals
from the Commission in order to
assess monetary penalties as
punishment for securities fraud.
Mary Schapiro, the new SEC chair,
claims
that the policy, among other
deleterious effects, "discouraged
staff from arguing for a penalty in
a case that might deserve a
penalty…" In other words, the
co-pilots were "encouraged" to keep
a lid on embarrassing news that
reflected badly on members of the
pilot class.

And, lest you should not labor under
any illusion that enforcement of
accounting rules is a level playing
field, consider the case in 1992 (I
think) when the SEC effectively
handed out special permission to
AT&T to account for its acquisition
of NCR as a "pooling of interests."
Quite evidently, the SEC staff could
not bring the bad news to the
"pilots" that the merger with NCR
would not happen just because AT&T
did not technically qualify for the
accounting it so sorely "needed." To
put it in the stark terms of today,
the merger was simply "too big to
fail." (And perhaps not
coincidentally, acquiring NCR proved
to be one of the biggest wastes of
shareholder wealth in the history of
AT&T.)

So our conclusion is that the net stimulus to
short-term GDP will not be zero, and will be positive, but the stimulus is
likely to be modest in magnitude. Some economists have assumed that every $1
billion spent by the government through the stimulus package would raise
short-term GDP by $1.5 billion. Or, in economics jargon, that the multiplier is
1.5. That seems too optimistic given the nature of the spending programs being
proposed. We believe a multiplier well below one seems much more likely . . . In
addition, although politics play an important part in determining all government
spending, political considerations are especially important in a spending
package adopted quickly while the economy is reeling, and just after a popular
president took office. Many Democrats saw the
stimulus bill as a golden opportunity to enact spending items they've long
desired. For this reason, various components of the
package are unlikely to pass any reasonably stringent cost-benefit test ... Our
own view is that the short-term stimulus from the legislation before Congress
will be smaller per dollar spent than is expected by many others because the
package tries to combine short-term stimulus with long-term benefits to the
economy. Unfortunately, short-term and long-term gains are in considerable
conflict with each other. Moreover, it is very hard to spend wisely large sums
in short periods of time. Nor can one ever forget that spending is not free, and
ultimately it has to be financed by higher taxes. Nobel Laureate Gary S. Becker and Kevin M. Murphy,
"There's No Stimulus Free Lunch: It's hard to spend wise and spend fast,"
The Wall Street Journal, February 10, 2009 ---
http://online.wsj.com/article/SB123423402552366409.html?mod=djemEditorialPage

Japan has been through countless "stimulus" packages
over the past 18 years, none of which has accomplished a thing apart from
driving that country deeply into debt. And after years and years of government
attempts to give artificial stimulus to the stock market and the real estate
sector, the Japanese stock market is now about where it was in the mid-1980s,
and real estate is selling, on average, for the same prices it was in 1975. The
same is true of the American economy of the 1930s, the decade in which President
Franklin D. Roosevelt was supposedly lifting the country out of the Great
Depression. Far from restoring prosperity, Roosevelt did everything he could to
interfere with the economy's adjustment from depression to health. Thus instead
of letting prices and wages move freely so the economy could reallocate
resources rationally, he kept wages artificially high (and workers artificially
unemployable) and propped up consumer prices. More pertinent to our situation,
FDR's make-work programs dwarfed even Herbert Hoover's public-works spending,
which had allocated more funds for that purpose in four years than had been
spent in the previous 20. Billions of dollars later, what FDR had succeeded in
doing was to divert resources from a private sector starved for capital, and
thereby weaken the forces of recovery. When genuine wealth generators have to
compete with government for labor and resources, the productive sector is
weakened at the hands of the parasitic sector. From 1933 to 1940, the
unemployment rate averaged 18 percent. As the 1930s ended, FDR's Treasury
secretary, Henry Morgenthau, wrote in his diary: "We have tried spending money.
We are spending more than we have ever spent before and it does not work.... We
have never made good on our promises.... I say after eight years of this
Administration we have just as much unemployment as when we started...and an
enormous debt to boot!"
Thomas E. Woods, Jr.,
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy
Tanked, and Government Bailouts Will Make Things Worse.
Read a free chapter at
MeltdownTheBook.com and visit Tom at
ThomasEWoods.com.

Consider his campaign pledges: It wasn’t
too long ago that Obama promised to “tell the corporate lobbyists that their
days of setting the agenda in Washington are over.” Ah, the corporate lobbyist,
every candidate’s favorite whipping boy. “They have not funded my campaign, they
will not run my White House, and they will not drown out the voices of the
American people when I am president,” Barack once
sworeto his sea of idolizing
worshipers.That was then; this is now. President Obama has allowed
seventeen exceptionsto the no-lobbyist
rule. And remember that “sunlight before signing” pledge, giving
citizens enough time to read a bill — and offer their opinions on it — before it
is signed into law? Well, that’s gone to the
wayside, too.Nicholas Giriglia, "Obama’s Broken
Promises Were Entirely Predictable," Pajamas Media, February 14, 2009 ---
http://pajamasmedia.com/blog/obamas-broken-promises-were-entirely-predictable/

Twelve years ago, President Bill Clinton
signed a law that he correctly proclaimed would end "welfare as we know it."
That sweeping legislation, the Personal Responsibility and Work Opportunity
Act, eliminated the open-ended entitlement that had existed since 1965,
replacing it with a finite, block grant approach called the Temporary
Assistance to Needy Families (TANF) program.

TANF has been a remarkable success.
Welfare caseloads nationally fell from 12.6 million in 1997 to fewer than
five million in 2007. And yet despite this achievement, House Democrats are
seeking to undo Mr. Clinton's reforms under the cover of the stimulus bill.

Currently, welfare recipients are limited
to a total of five years of federal benefits over a lifetime. They're also
required to begin working after two years of government support. States are
accountable for helping their needy citizens transition from handouts to
self-sufficiency. Critically, the funds provided to states are fixed
appropriations by the federal government.

Through a little noticed provision of the
stimulus package that has passed the House of Representatives, the bill
creates a fund for TANF that is open-ended -- the same way Medicare and
Social Security are.

In the section of the House bill dealing
with cash assistance to low-income families, the authors inserted the
bombshell phrase: "such sums as are necessary." This is a profound departure
from the current statutory scheme, despite the fact that, in this particular
bill, state TANF spending would be capped. The "such sums" appropriation
language is deliberately obscure. It is a camel's nose provision intended to
reverse Clinton-era legislation and create a new template for future TANF
reauthorizations.

Most liberals have always disliked welfare
reform; critics of TANF believed Mr. Clinton supported it only to get
re-elected. Some asserted it was racist or intended to punish the poor.
Others claimed that the funds to assist single mothers with child care,
transportation and job training were never as generous as were allegedly
promised. Today, the fact that disqualification from the program is based on
failing to secure a job within two years seems especially harsh given this
economic crisis.

There are legitimate objections to the
program that are worth debating. But this is not an open debate: It is a
near secret provision buried deep in a more than 600-page piece of
legislation.

The TANF provisions of the stimulus bill,
like the nearly $100 billion Medicaid provisions, are less about stimulating
the economy, and more about the federal government absorbing the states'
budget problems. State budgets may be swamped with those needing temporary
relief, and a contingency fund could help. But it should be a definite
amount, not a precedent-setting, open-ended amount. (If the initial TANF
allocation is not sufficient, Congress could appropriate another definite
amount.)

The offending language is not in
yesterday's Senate version of the bill, but that provides little comfort.
The attempt to undo welfare reform has not been transparent, and the
conference committee provides the perfect closed-door environment for
slipping in "such sums" language into the final bill without public
scrutiny.

Welfare reform was arguably the most
important legislative development of the mid-1990s. It is bad policy to
jettison it with five words during an economic crisis.

All who are concerned about our nation's
unfunded obligations should be on guard against attempts to slip "such sums"
language into any conference committee bill. Welfare policy is too important
to change with a stealth maneuver.

Mr. Sasse, former U.S. assistant secretary of Health
and Human services, teaches policy at the University of Texas. Mr. Weems,
former vice chairman of the American Health Information Community, held the
position of administrator of the Centers for Medicare and Medicaid services
until last month.

In his remarks, every gloomy statistic on the
economy becomes a harbinger of doom. As he tells it, today's economy is the
worst since the Great Depression. Without his Recovery and Reinvestment Act, he
says, the economy will fall back into that abyss and may never recover . . .
.The latest survey pegs U.S. unemployment at 7.6%. That's more than three
percentage points below the 1982 peak (10.8%) and not even a third of the peak
in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great
Depression . . . Mr. Obama's analogies to the Great Depression are not only
historically inaccurate, they're also dangerous. Repeated warnings from the
White House about a coming economic apocalypse aren't likely to raise consumer
and investor expectations for the future. In fact, they have contributed to the
continuing decline in consumer confidence that is restraining a spending pickup.
Beyond that, fearmongering can trigger a political stampede to embrace a
"recovery" package that delivers a lot less than it promises. A more cool-headed
assessment of the economy's woes might produce better policies. Bradley Schiller, "Obama's Rhetoric
Is the Real 'Catastrophe' In 1932, automobile production shriveled by 90%,"
The Wall Street Journal, February 13, 2009 ---
http://online.wsj.com/article/SB123457303244386495.html?mod=djemEditorialPage

I wanted to speak with Professor Barro after
reading hispiece in
the Wall Street Journalabout the multiplier on
government spending. The piece, which argued that the multiplier has
historically been much lower than the Obama administration hopes, produced a
tremendous amount of response -- from
Paul Krugman,
Brad DeLong,
Greg Mankiw,
Matt Yglesias, and
Tyler Cowen(some of them several times). And that
response was notable, in part, because it turned into a reflection on the
"standards" of the stimulus debate itself. I was interested to hear what
Barro thought about his critics this debate.

He was admirably patient with my questions:

Conor Clarke: What I am trying to do is sort of apply a barometer to
modern macroeconomics and see where the profession is, because I am sort of
confused by a lot of things.

Robert Barro: [laughs] Probably the fault of the profession.

Well, one thing I am confused by is where all of this resurgent interest
and fiscal policy came from. That's very broad. But where do you think it
came from? When I took macroeconomics in college there was not a lot about
fiscal policy.

It came from the crisis and memories of the Great Depression and the fact
that monetary policy seems to have done not a tremendous amount, and
conventional stuff doesn't look like its going to work anymore. And it's
about grasping at straws to try and find something else.

And I take it from the Wall Street Journal piece you wrote last week...
well, the piece is just specifically about measuring multipliers, but I take
it that you are fairly skeptical in general that fiscal policy will boost
aggregate demand.

Right. There's a big difference between tax rate changes and things that
look just like throwing money at people. Tax rate changes have actual
incentive effects. And we have some experience with those actually working.

What would you say is the best empirical evidence there?

Well, you know, it worked to expand GDP for example in '63 and '64 with the
Kennedy/Johnson cuts. And then Reagan twice in '81 and '83 and then in '86.
And then the Bush 2003 tax-cutting program. Those all worked in the sense of
promoting economic growth in a short time frame.

I'm the middle of a study where I am trying to estimate this overall, going
back to 1913 -- sort of constructing some measure of the overall effect of
the tax rate at the margin, at the moment. I'm just looking at that now,
actually...

You're talking about the multiplier on a dollar of...

Well both things, but here I'm talking about the tax rate stuff. Get some
measure of the effect of marginal tax rate that comes from the government --
federal, state, local. And then you can see what it looks like going down or
going up and how the economy responds. And then, in addition to that, the
government might be spending more or less money on either military stuff or
not on military stuff. And we can estimate that at the same time. With the
government spending stuff, the clearest evidence is in wartime. It's not
that it's the most pertinent, but it's the clearest in terms of evidence
because it's the dominating evidence at those times, especially during the
world wars.

Do you read Paul Krugman's blog?

Just when he writes nasty individual comments that people forward.

Oh, well he wrote a series of posts saying he thought the World War II
spending evidence was not good, for a variety of reasons, but I guess...

He said elsewhere that it was good and that it was what got us out of the
depression. He just says whatever is convenient for his political argument.
He doesn't behave like an economist. And the guy has never done any work in
Keynesian macroeconomics, which I actually did. He has never even done any
work on that. His work is in trade stuff. He did excellent work, but it has
nothing to do with what he's writing about.

I'm not in a position to...

No, of course not.

I'm not in a position to know things like the degree to which Paul
Krugman counts as a relevant expert on new Keynesian economics.

He hasn't done any work on that. Greg Mankiw has worked in that area.

And Greg Mankiw is, I guess, skeptical of spending for the same reasons
that you are: he says that there's some empirical evidence -- I think he
cites the Christina Romer study from 15 years ago -- that a dollar of tax
cutting has a larger impact than...

The Romer evidence is very recent actually. It's an ongoing project.

I thought it's from 1993 or something like that. Maybe that's something
else.

They have a current thing that's going to be presented at Brookings at the
next meeting, where they have some estimates of how the economy responds to
tax changes. It's not really looking at tax rates. It's looking at tax
revenue, which is not the same thing. That's mostly what Greg was referring
to, which is going to be presented in a few months.

I would need to go back and check. But one question, and I think Greg
Mankiw raises this question as well, is, Why does this set of evidence
depart from what seems like the standard Keynesian theory that a dollar of
spending would have a larger multiplier than a dollar of tax cutting?

I don't think it is really confusing at all, because when you cut taxes
there are two different effects. One is that you cut tax rates, and
therefore give people incentives to do things like work and produce more and
pay more -- maybe, depending on what kind of taxes. And then you also maybe
give people more income. This income effect is the one that's related to
this Keynesian multiplier argument, where it's usually argued that
government spending should have a bigger effect. So that's the income
effect. But the tax-rate effect, inducing people to do things like work and
produce more and invest more, is a whole separate effect, and that could
easily be much bigger than the multiplier thing, than the income thing.

This might just be my confusion, but the inducement to work, is separate
from the idea of boosting aggregate demand and consumption in the short run.

Oh it's exceptionally different. But the experiment is that the government
is doing something by changing the tax system to lower its collections --
by, for example, a tax cut. The response of the economy to that is not going
just to isolate this business of giving people money. It's also going to
have these incentive effects, more than tax rebates, on economic activity.
It's going to be a combination of those two things -- income effects and
incentive effects. One piece looks like this sort of multiplier stuff, which
is analogous to government spending -- probably because the government
spending has a first-round effect where it comes in and directly affects the
aggregate demand -- and then in the second round it sort of looks like a tax
cut. That's why the government spending thing is bigger in textbooks:
because it has this first round in addition to all these subsequent ones.

But all that is just income responses -- people having more or less income,
or the government keeping the money and then that shows up as people's
income. None of that is about responses in terms of incentives --
incentives changing in response to lower or higher tax rates. And the
evidence that Romer and Romer look at is combining the tax rate stuff with
the income stuff. I didn't know it was possible to do that but, hey, you get
different viewpoints form different people. But the study I am doing now is
intended to include all these things together in one framework.

And when does this study come out?

Who knows. I mean, it's a big project, we've been working on it for a while.
Part of it is just measuring, back since 1913, the effect of the tax rate
that the federal government or the total government is levying on people.
Measuring that was a big project. But we've sort of finished that.

I just have two more questions, quickly. One is that you've mentioned
that monetary policies sort of seem to be stuck. And I guess there have been
a couple of people -- Robert Lucas is one that comes to mind and maybe Greg
Mankiw too -- who say there are other kinds of monetary policy that can
still be pursued.

Oh I agree with that. There are things that they can still do. The sort of
standard stuff. They drove the nominal rates on the usual government paper
down to zero, and they drove down the federal funds rate, so they don't have
any more leeway on that. But there is plenty of other stuff that they can do
and that they are doing.

And what is that?

The Federal Reserve is buying up all kinds of other assets, like long-term
government bonds. But they are also buying a lot of private stuff, and that
will presumably have a substantial impact. I mean there's a downside to
doing all this, but it should certainly have effects. So in that sense they
haven't run out of ammunition. I agree with that.

The last thing is just about the stimulus bills as it stands. Two things
here. One thing is what do you think about the ratio of spending to tax
relief in the bill. And the second is, if you judge it by Larry Summers
standard -- that stimulus be temporary, timely and targeted -- does it clear
the bar?

This is probably the worst bill that has been put forward since the 1930s. I
don't know what to say. I mean it's wasting a tremendous amount of money. It
has some simplistic theory that I don't think will work, so I don't think
the expenditure stuff is going to have the intended effect. I don't think it
will expand the economy. And the tax cutting isn't really geared toward
incentives. It's not really geared to lowering tax rates; it's more along
the lines of throwing money at people. On both sides I think it's garbage.
So in terms of balance between the two it doesn't really matter that much.

Well, presumably Larry Summers is not an idiot.

[laughs] That is another conversation. I have known him for 25 years, and I
have opinions about that.

Well, presumably Christina Romer is not an idiot if you're...

They've brought in some reasonable people in terms of economic advisors. I
don't know what impact they're having, and I suppose they have different
views on Keynesian macroeconomics than I have. But I'm giving you my opinion
about it.

I think Geithner is a good appointment. I think he's going to focus on what
really matters, which is the financial system and the housing market. That's
where they should be putting their efforts. That's where the problems came
from.

Fixing the credit market, you mean?

That was the main problem in the Great Depression, too. Though then it was
concentrated on commercial banks which were the main credit vehicle. That
was the main problem in the depression and fixing that was the main thing
that ended the depression.

Well since you brought it up... I have no idea what your views are on
financial economics, but it seems like there's going to be another round of
TARP-like bailouts. Do you have an opinion on how that should be structured?

That's a hard problem. I mean, they're basically floundering around -- the
crew of the previous administration more than the current one. But I admit
they're having a good effect by putting more resources into assistance. The
exact way to do it is pretty tricky. It's not clear what the best thing to
do is. Larry Summers did bring in Jeremy Stein, who is probably one of the
best people in the area. I think he's going to have a lot of impact on that
design. I hope so. That's another person they hired recently.

From Harvard?

Yeah, he's a Harvard economics department person. He's in the White House.
Summers brought him in to advise particularly on the financial and housing
issues, the design of the new regulations structure. That was an excellent
appointment. That's the stuff that's really going to count. Not this
spending thing. I mean democrats were waiting with all these ridiculous
projects, and now they've got an excuse to bring it through politically.

Just one last thing. I think Joe Biden and a couple other people have
said there's a fairly wide consensus among economists that fiscal stimulus
in the form of a large spending bill is the way to go, and...

He said first that every economist thought that.

Well, that's Joe Biden hyperbole. But what is the lay of the land there?
Presumably there are economists out there that take this seriously. And then
there are economists out there who think there's a one-for-one crowding out
with any government spending. And I guess, where does the profession fall on
that spectrum?

Most economists haven't really been thinking about this issue, they haven't
really focused on it. It's not their specialty. Most economists today, they
haven't really been thinking about this kind of multiplier issue. Which goes
back to that first question you asked about how come now we're so worried
about this. I don't think most economists are focused on this, or that
they're familiar with the empirical evidence. I don't think they've really
worked on the theory. So I don't know, maybe they have some opinion that
they got from graduate school or something.

I think my sense is that the sentiment has been moving against this kind of
approach both within the economics profession and more broadly. I think the
initial view was that "yeah, this is a terrible situation" -- which I agree
with -- "and we've got to do something about this, and maybe this will
work." I think there was support in that sense.

Are there any conditions under which you might think spending could have
a positive effect on output or is it always going to be the case that as a
relative matter that tax cuts are going to be better?

Tax cuts are bound to be better.
I think the best evidence for expanding GDP comes from the temporary
military spending that usually accompanies wars -- wars that don't destroy a
lot of stuff, at least in the US experience. Even there I don't think it's
one for one, so if you don't value the war itself it's not a good idea. You
know, attacking Iran is a shovel-ready project. But I wouldn't recommend it.

America, what is happening to you?
Much has been made of the subprime debacle. But few seem to be willing to talk
about another looming crisis: credit card debt. People like Nouriel Roubini, the
professor who has predicted much of this crisis, have estimated that you could
have losses of as much as $3.6 trillion, which would bankrupt the industry. What
do you make of that number? And since credit card defaults are correlated to
employment, what happens if unemployment goes as high as 10 percent or more?
What is the highest unemployment level that you’ve used in your forecasting
models? And do you have adequate reserves for your worst-case situation? If your
assumptions are wrong, what happens?Andrew Ross Sorkin, "Up Next for
Bankers: A Flogging," The New York Times, February 9, 2009 ---
http://www.nytimes.com/2009/02/10/business/10sorkin.html?_r=1&partner=permalink&exprod=permalink
Bob Jensen's threads on the bailout mess are at
http://www.trinity.edu/rjensen/2008Bailout.htm

After spending over $1 billion of its stimulus gift in Brazil, GM asks for
more
General Motors Corp., nearing a federally imposed deadline to present a
restructuring plan, will offer the government two costly alternatives: commit
billions more in bailout money to fund the company's operations, or provide
financial backing as part of a bankruptcy filing, said people familiar with GM's
thinking. The competing choices, which highlight GM's rapidly deteriorating
operations, present a dilemma for Congress and the Obama administration. If they
refuse to provide additional aid to GM on top of the $13.4 billion already
committed they risk seeing an industrial icon fall into bankruptcy. The Wall Street Journal, February 13, 2009 ---
http://online.wsj.com/article/SB123458663412987489.html?mod=testMod

America, what is happening to you?“One thing seems probable to me,” said Peer Steinbrück,
the German finance minister, in September 2008....“the United States will lose
its status as the superpower of the global financial system.” You don’t have to
strain too hard to see the financial crisis as the death knell for a
debt-ridden, overconsuming, and underproducing American empire . . . Richard Florida, "How the Crash Will
Reshape America," The Atlantic, March 2009 ---
http://www.theatlantic.com/doc/200903/meltdown-geography

Meet Marion and Herb Sandler

Time Magazine lists 25 men and women to blame for the financial crisis
along with, for some unknown reason, their physical stature. They include some
familiar faces (Phil Gramm, Alan Greenspan, Hank Paulson, Bill Clinton, George
Bush, and Frank Raines) and some less familiar faces (Angelo Mozilo, Joe Cassano,
Ian McCarthy, Kathleen Corbet, Dick Fuld, Jimmy Cayne, David Oddsson, and Herb
and Marion Sandler). For some reason Time Magazine leaves out some of the
key culprits like Rep. Barney Frank and Sen. Chris Cox who forced Fannie Mae and
Freddie to buy up toxic subprime mortgages issued to poor people who had no hope
of even paying property taxes and utility bills on homes let alone mortgage
payments. But the List of 25 is an interesting array of culprits for the blame
game, especially those like the Sandlers who walked away billionaires while
leaving taxpayers to clean their empty barns. Others like Mozilloo, Casano,
Cayne, O'Neal, and Fuld made over $500 million but fell short of $1 billion in
walk-away loot.

Especially note that CBS Sixty Minutes on February 15 did a special on
Marion and Herb Sandler. This along with the
Wall Street Journal piece on Mervene really highlights the lowest level
of the subprime fraud chain that contributed most to the banking mess we're in
today. Whereas most of the Mervene-type frauds entailed refinancing
mortgages to poor people like Mervene with loan balances sometimes more than 10
times the value of their homes that, in turn, allowed these people to spend on
such things as expensive trucks, electronics, and narcotics. Those fraudulent
mortgages were typically re-sold to helpless suckers like Fannie and Freddie.
There were also managers in Lehman Brothers, Merrill Lynch, and other Wall
Street firms that knowingly screwed their own companies just to get their added
compensation for packaging toxic CDOs using toxic mortgages as collateral. This
turned out to be soiled toilet paper collateral.

The Sandler case is somewhat unique. Instead of selling the toxic mortgages
brokered by their World Savings Bank, they kept those mortgages in WSB until
they sold the entire World Savings Bank to Wachovia for over $2.4 billion profit
to them. Although Freddie and Fannie did not get stuck with WSB's toxic paper,
Wachovia folded and was bought up by Wells Fargo. Since Wells Fargo is now in
for a big bailout, the Federal Government will probably end up with the WSB's
toxic paper even if it was not originally sold to Fannie or Freddie.

In covering the hearing of the nine bank chief
executives on Capitol Hill, it didn’t take long for me to see that Wells
Fargo CEO John Stumpf was having a hard time of it, valiant effort though he
did make to defend his bank’s lending practices.

Because to look inside Wells Fargo, you will find
the worst of the mortgage lenders housed in this bank, Wachovia, which Wells
Fargo bought last fall for $15.4 bn, and housed within Wachovia is Golden
West Financial, which Wachovia bought for a stupefying $25 bn, Golden West,
the purveyor of some of the worst junk mortgages in the country.

Wachovia Corp.’s disastrous $25.5 bn acquisition of
Golden West Financial in May 2006, two months before the peak of the housing
bubble (see blog “Dumb Bubble Deals”), is a portrait of the housing crisis
in miniature.

At bottom you will find a revealing–and
impenetrably absurd–transcript of a presentation given by Wachovia
management defending the Golden West deal at an analyst-investor conference
a week after Wachovia made this disastrous acquisition in May 2006.

The transcript provides a roadmap for why this
country is facing the worst housing and banking crisis since the Great
Depression. And watch how obsequious Wall Street analysts behave, the
smartest guys in the room who are supposed to catch the fire engine red
flags. Kudos to footnoted.org for catching this one, the best footnote
digging site in the country.

Golden West was a mom and pop shop that went
berserk rubberstamping reckless loans for the worst of California’s
borrowers, as the country’s biggest purveyor of the option ARM, which lets
borrowers set which payments they want to make, in many cases, interest-only
payments on no-doc loans.

These ARMs are the worst of the lot, and they are
now adjusting to higher rates, providing an economic effect that is the
equivalent of the levees breaking in New Orleans. Option ARMs, indeed, are
the most radioactive of loans, and they will drag down the economy this year
and next, analysts note.

Herbert and Marion Sandler, who built Golden West
into a mortgage mill, made off with $2.4 bn in the deal.

Indeed it might not be worth breaking a sweat if the
stimulus bill was going to spend the measly $168 billion that George Bush's tax
rebates threw at the economy last year. Nobody gets upset anymore if Washington
wastes a hundred billion dollars. But coming after four months of the TARP's
dizzying billions spent in futility, we get a president proposing to spend
nearly $1,000,000,000,000 on what he calls "stimulus." Even a populace numb to
its government's compulsive spending woke up to that fantastic sum. . . .
The whole congressional effort is an irrelevant sideshow; only the final
spending number matters. The economics don't matter, because the real political
purpose of the bill is to neutralize this issue until the economy recovers on
its own. Much of its spending is a massive cash transfer to the party's union
constituencies; a percentage of that cash will flow back into the 2010
congressional races. The bill in great part is a Trojan horse of Democratic
policies not related to anyone's model of economic stimulus. Finally, if this
bill's details are irrelevant to the presumed multiplier effect of an $800
billion Keynesian stimulus, GOP Sen. Susan Collins's good-faith participation in
it looks rather foolish. Daniel Henninger, "Exactly How Does
Stimulus Work? Separating economics from theatrics," The Wall Street Journal,
February 12, 2009 ---
http://online.wsj.com/article/SB123440338832275537.html?mod=djemEditorialPage

In short, inflation undermines capitalism
by destroying the rationale for dedicating a portion of today's earnings to
savings. Accumulated savings provide
the capital that finances projects that generate higher future returns; it's
how an economy grows, how a society reaches higher levels of prosperity. But
inflation makes suckers out of savers.

If capitalism is to be preserved, it can't
be through the con game of diluting the value of money. People see through
such tactics; they recognize the signs of impending inflation. When we see
Congress getting ready to pay for 40% of 2009 federal budget expenditures
with money created from thin air, there's no getting around it. Our money
will lose its capacity to serve as an honest measure, a meaningful unit of
account. Our paper currency cannot provide a reliable store of value.

So we must first establish a sound
foundation for capitalism by permitting people to use a form of money they
trust. Gold and silver have traditionally served as currencies -- and for
good reason. A study by two economists at the Federal Reserve Bank of
Minneapolis, Arthur Rolnick and Warren Weber, concluded that gold and silver
standards consistently outperform fiat standards. Analyzing data over many
decades for a large sample of countries, they found that "every country in
our sample experienced a higher rate of inflation in the period during which
it was operating under a fiat standard than in the period during which it
was operating under a commodity standard."

Given that the driving force of
free-market capitalism is competition, it stands to reason that the best way
to improve money is through currency competition. Individuals should be able
to choose whether they wish to carry out their personal economic
transactions using the paper currency offered by the government, or to
conduct their affairs using voluntary private contracts linked to payment in
gold or silver.

Legal tender laws currently favor
government-issued money, putting private contracts in gold or silver at a
distinct disadvantage. Contracts denominated in Federal Reserve notes are
enforced by the courts, whereas contracts denominated in gold are not. Gold
purchases are subject to taxes, both sales and capital gains. And while the
Constitution specifies that only commodity standards are lawful -- "No state
shall coin money, emit bills of credit, or make anything but gold and silver
coin a tender in payment of debts" (Art. I, Sec. 10) -- it is fiat money
that enjoys legal tender status and its protections.

Now is the time to challenge the exclusive
monopoly of Federal Reserve notes as currency. Buyers and sellers, by mutual
consent, should have access to an alternate means for settling accounts;
they should be able to do business using a monetary unit of account defined
in terms of gold. The existence of parallel currencies operating
side-by-side on an equal legal footing would make it clear whether people
had more confidence in fiat money or money redeemable in gold. If the
gold-based system is preferred, it means that people fully understand that
the purpose of money is to facilitate commerce, not to camouflage fiscal
mismanagement.

Private gold currencies have served as the
medium of exchange throughout history -- long before kings and governments
took over the franchise. The initial justification for government
involvement in money was to certify the weight and fineness of private gold
coins. That rulers found it all too tempting to debase the money and defraud
its users testifies more to the corruptive aspects of sovereign authority
than to the viability of gold-based money.

Which is why government officials should
not now have the last word in determining the monetary measure, especially
when they have abused the privilege.

The same values that will help America
regain its economic footing and get back on the path to productive growth --
honesty, reliability, accountability -- should be reflected in our money.
Economists who promote the government-knows-best approach of Keynesian
economics fail to comprehend the damaging consequences of spurring economic
activity through a money illusion. Fiscal "stimulus" at the expense of
monetary stability may accommodate the principles of the childless British
economist who famously quipped, "In the long run, we're all dead." But it
shortchanges future generations by saddling them with undeserved debt
obligations.

There is also the argument that
gold-linked money deprives the government of needed "flexibility" and could
lead to falling prices. But contrary to fears of harmful deflation, the big
problem is not that nominal prices might go down as production declines, but
rather that dollar prices artificially pumped up by government deficit
spending merely paper over the real economic situation. When the output of
goods grows faster than the stock of money, benign deflation can occur -- it
happened from 1880 to 1900 while the U.S. was on a gold standard. But the
total price-level decline was 10% stretched over 20 years. Meanwhile, the
gross domestic product more than doubled.

At a moment when the world is questioning
the virtues of democratic capitalism, our nation should provide global
leadership by focusing on the need for monetary integrity. One of the most
serious threats to global economic recovery -- aside from inadequate savings
-- is protectionism. An important benefit of developing a parallel currency
linked to gold is that other countries could likewise permit their own
citizens to utilize it. To the extent they did so, a common currency area
would be created not subject to the insidious protectionism of sliding
exchange rates.

The fiasco of the G-20 meeting in
Washington last November -- it was supposed to usher in "the next Bretton
Woods" -- suggests that any move toward a new international monetary system
based on gold will more likely take place through the grass-roots efforts of
Americans. It may already be happening at the state level. Last month,
Indiana state Sen. Greg Walker introduced a bill -- "The Indiana Honest
Money Act" -- which would, if enacted, allow citizens the option of paying
in or receiving back gold, silver or the equivalent electronic receipt as an
alternative to Federal Reserve notes for all transactions conducted with the
state of Indiana.

It may turn out to be a bellwether.
Certainly, it's a sign of a growing feeling in the heartland that we need to
go back to sound money. We need money that works for the legitimate
producers and consumers of the world -- the savers and borrowers, the
entrepreneurs. Not money that works for the chiselers.

Ms. Shelton, an economist, is author of "Money
Meltdown: Restoring Order to the Global Currency System" (Free Press, 1994).

Nouriel Roubini lays out the four ways to fix
insolvent banking systems. Then he explains why the first three--the ones
we're using--are lousy:

There are four basic approaches to a clean-up of a
banking system that is facing a systemic crisis:

1. Recapitalization together with the
purchase by a government “bad bank” of the toxic assets;

2. Recapitalization together with
government guarantees – after a first loss by the banks – of the toxic
assets;

3. Private purchase of toxic assets
with a government guarantee and/or – semi-equivalently - provision of public
capital to set up a public-private bad bank where private investors
participate in the purchase of such assets (something similar to the US
government plan presented by Tim Geithner today for a Public-Private
Investment Fund);

4. Outright government takeover (call
it nationalization or “receivership" if you don’t like the dirty N-word) of
insolvent banks to be cleaned after takeover and then resold to the private
sector.

Of the four options the first three have serious
flaws: in the bad bank model the government may overpay for the bad assets –
at a high cost for the taxpayer - as the true value of them is uncertain;
and if it does not overpay for the assets many banks are bust as the
mark-to-market haircut they need to recognize is too large for them to bear.

Even in the guarantee (after first loss) model
there are massive valuation problems and there can be very expensive risk
for the tax-payer (an excessive guarantee that is not properly priced by the
first loss of the bank, the fees paid and the value of equity that that the
government receives for the guarantee) as the true value of the assets is as
uncertain as in the purchase of bas assets model. The shady guarantee deals
recently done with Citi and Bank of America were even less transparent than
an outright government purchase of bad asset as the bad asset purchase model
at least has the advantage of transparency of the price paid for toxic
assets.

In the bad bank model the government has the
additional problem of having to manage all the bad assets it purchased,
something that the government does not have much expertise in. At least in
the guarantee model the assets stay with the banks and the banks know better
how to manage and have a greater incentive than the government to eventually
work out such bad assets...

Thus all the schemes that have been so far proposed
to deal with the toxic assets of the banks may be a big fudge that either
does not work or works only if the government bails out shareholders and
unsecured creditors of the banks.

So much for all the plans put forth so far,
including Tim Geithner's latest brainstorm. Now on to the solution.

Note that Nouriel is not recommending the
alternative that Geithner and Summers always invoke when someone suggests
this route: permanent government ownership and operation of the banks. We
all agree that would be a disaster. What Nouriel is talking about is
temporary receivership and restructuring.

Thus, paradoxically nationalization may be a more
market friendly solution of a banking crisis: it creates the biggest hit for
common and preferred shareholders of clearly insolvent institutions and –
most certainly – even the unsecured creditors in case the bank insolvency
hole is too large; it provides a fair upside to the tax-payer. It can also
resolve the problem of avoiding having the government manage the bad assets:
if you selling back all of the assets and deposits of the bank to new
private shareholders after a clean-up of the bank together with a partial
government guarantee of the bad assets (as it was done in the resolution of
the Indy Mac bank failure) you avoid having the government managing the bad
assets. Alternatively, if the bad assets are kept by the government after a
takeover of the banks and only the good ones are sold back in a
re-privatization scheme, the government could outsource the job of managing
and working out such assets to private asset managers if it does not want to
create its own RTC bank to work out such bad assets.

Nationalization also resolves the too-big-too-fail
problem of banks that are systemically important and that thus need to be
rescued by the government at a high cost to the taxpayer. This
too-big-to-fail problem has now become an even-bigger-to-fail problem as the
current approach has lead weak banks to take over even weaker banks. Merging
two zombie banks is like have two drunks trying to help each other to stand
up.

The JPMorgan takeover of insolvent Bear Stearns and
WaMu; the Bank of America takeover of insolvent Countrywide and Merrill
Lynch; and the Wells Fargo takeover of insolvent Wachovia show that the
too-big-to-fail monster has become even bigger. In the Wachovia case you had
two wounded institutions (Citi and Wells Fargo) bidding for a zombie
insolvent one. Why? Because they both knew that becoming even bigger-to-fail
was the right strategy to extract an even larger bailout from the
government. Instead, with nationalization approach the government can
break-up these financial supermarket monstrosities into smaller pieces to be
sold to private investors as smaller good banks.

This “nationalization” approach was the one
successfully taken by Sweden while the current US and UK approach may end up
looking like the zombie banks of Japan that were never properly restructured
and ended up perpetuating the credit crunch and credit freeze. Japan ended
up having a decade long near-depression because of its failure to clean up
the banks and the bad debts. The US, the UK and other economies risk a
similar near depression and stag-deflation (multi-year recession and price
deflation) if they fail to appropriately tackle this most severe banking
crisis.

SUMMARY: "Mr.
Gordon is the author of 'Hamilton's Blessing: The Extraordinary Life and
times of Our National Debt' (Walker, 1997)." He discusses the budget deficit
and national debt before and after passage of the stimulus package.

CLASSROOM APPLICATION: The
article may be used in governmental accounting courses to understand the
importance of governmental accounting information to the legislative process
and the running of our country. The topics focus on understanding budget
deficit versus the level of debt.

QUESTIONS:
1. (Introductory)
What is the historical status of our government in relation to debt?

2. (Advanced)
What is a budget deficit? How much is our government's budget deficit
projected to be in fiscal 2009?

3. (Advanced)
What is the difference between the level of national debt and a budget
deficit in the current year?

4. (Advanced)
The author notes that "in fiscal 2008, the national debt increased from $9
trillion to slightly over $10 trillion. Yet the budget deficit in the last
fiscal year was $455 billion." What is wrong with this relationship?

5. (Advanced)
Explain the following statement in terms of governmental accounting,
including explaining where the information is located in the financial
statements: "Just call the money borrowed from the Social Security trust
fund an 'intragovernmental transfer: and exclude it from the calculation of
the deficit."

6. (Introductory)
Overall, how does this opinion-page piece characterize the need for unbiased
financial information about governmental entities?

When President Barack Obama signed the American
Recovery and Reinvestment Act of 2009 into law yesterday, he was adding to
what is already almost guaranteed to be the largest deficit in American
history. In January, the Congressional Budget Office projected that the
deficit this year would be $1.2 trillion before the stimulus package. That's
more than twice the deficit in fiscal 2008, more than the entire GDP of all
but a handful of countries, and more, in nominal dollars, than the entire
United States national debt in 1982.

But while the sum is huge, it is not in and of
itself threatening to the solvency of the Republic. At 8.3% of GDP, this
year's deficit is by far the largest since World War II. But the total debt
is, as of now, still under 75% of GDP. It was almost 130% following World
War II. (Japan's national debt right now is not far from 180% of that
nation's GDP.)

Still, it's the trend that is worrisome, to put it
mildly. There have always been two reasons for adding to the national debt.
One is to fight wars. The second is to counteract recessions. But while the
national debt in 1982 was 35% of GDP, after a quarter century of nearly
uninterrupted economic growth and the end of the Cold War the debt-to-GDP
ratio has more than doubled.

It is hard to escape the idea that this happened
only because Democrats and Republicans alike never said no to any
significant interest group. Despite a genuine economic emergency, the
stimulus bill is more about dispensing goodies to Democratic interest groups
than stimulating the economy. Even Sen. Charles Schumer (D., N.Y.) -- no
deficit hawk when his party is in the majority -- called it "porky."

It was not ever thus. Before the Great Depression,
balancing the budget and paying down the debt were considered second only to
the defense of the country as an obligation of the federal government.
Before 1930, the government ran surpluses in two years out of three. In
1865, the vast debt run up in the Civil War amounted to about 30% of GDP; by
1916 it was less than a tenth of that.

There even was a time when the U.S. made it a
deliberate policy to pay off the national debt entirely -- and succeeded in
doing so. It remains to this day the only time in history a major country
has been debt free. Ironically, the president who achieved this was the
founder of the modern Democratic Party, Andrew Jackson.

Jackson was a Jeffersonian through and through. The
smaller the federal government, the more he liked it. And, like Jefferson,
he hated banks, speculation and the "money interest." Unlike Jefferson,
however, he was born poor and made his own fortune. An early personal
encounter with debt had taught him to fear it. When the notes of someone who
had bought land from him proved worthless, he became liable for the debts he
had secured with those notes, and it took him years to pay them off.

When he ran for president the first time, in 1824,
Jackson called the debt a "national curse." He vowed to "pay the national
debt, to prevent a monied aristocracy from growing up around our
administration that must bend to its views, and ultimately destroy the
liberty of our country."

"How gratifying," he wrote in 1829 as he began his
presidency, "the effect of presenting to the world the sublime spectacle of
a Republic of more than 12 million happy people, in the 54th year of her
existence . . . free from debt and with all . . . [her] immense resources
unfettered!"

When Jackson entered the White House, the national
debt, which had reached $125 million at the end of the War of 1812, had
already been reduced to $48 million. To get it to zero he was perfectly
willing to forego what were then called "internal improvements" and are now
known as infrastructure projects. One Kentucky congressman, after a trip to
the White House to beg Jackson to sign one such bill, reported to his allies
that "nothing less than a voice from Heaven would prevent the old man from
vetoing the Bill, and [I doubt] whether that would!"

At the end of 1834, Jackson reported in the State
of the Union message that the country would be debt free as of Jan. 1, 1835,
with a Treasury balance of $440,000. Government revenues that year would be
twice expenses.

It didn't last long, to be sure. The great
prosperity of the early 1830s broke in the summer of 1836 when a bubble in
land speculation, fueled by easy credit, abruptly ended. The bubble burst,
ironically enough, thanks to Andrew Jackson's issuance of the "specie
circular," which required that all land bought from the government, except
that actually settled on, be paid for in gold or silver.

By the next spring, just as Jackson left the White
House, the longest contraction in American history -- six years -- had
begun. As one Wall Streeter put it, "The fortunes we have heard so much
about in the days of speculation, have melted like the snows before an April
sun." Federal revenues fell by half that year and the national debt was
back, this time for good.

While today there is no hope of balancing the
budget -- or wisdom in trying to -- until the economy substantially
improves, we could make a sort of down payment on reforming Washington's
porky ways by simply starting to tell the truth.

It has been widely noted that 2009 will have the
first "trillion-dollar deficit" in American history. Actually it's the
second. In fiscal 2008, the national debt increased from $9 trillion to
slightly over $10 trillion. Yet the budget deficit in the last fiscal year
was officially reported as being $455 billion. How could the national debt
have increased by considerably more than twice the "deficit"? Simple. Just
call the money borrowed from the Social Security trust fund an "intragovernmental
transfer" and exclude it from the calculation of the deficit.

Corporate managers have gone to jail for less book
cooking than that.

Mr. Gordon is the author of "Hamilton's Blessing: The Extraordinary
Life and Times of Our National Debt" (Walker, 1997).

Lots of people now have multiple computers, at home
and at work, and many use more than one Web browser. That makes it hard to
keep bookmarks straight. If, for instance, you bookmark a Web site as a
"Favorite" on your PC at work using Microsoft's Internet Explorer, it
doesn't automatically show up as a bookmark in Apple's Safari browser on
your Macintosh at home.

But I've been testing a new, free program,
available now, that aims to solve this problem. It synchronizes your
bookmarks automatically among all your computers, Windows or Mac, and across
all the main brands of Web browsers -- Internet Explorer, Safari and
Mozilla's Firefox. On PCs running Windows XP or Vista, it works with
Internet Explorer and Firefox. On Macs, it works with Safari and Firefox.

The program is called Foxmarks, and it's from a San
Francisco company of the same name. The Foxmarks software has been around
since 2006, but worked only with the Firefox browser -- hence the name. Yet
Firefox isn't the dominant choice on either Windows or Mac. So the company
decided to expand the product to Internet Explorer, which is the built-in
browser on Windows (and thus No. 1 in the world) and Safari, which is the
built-in browser on Mac.

This new version, available for download at
foxmarks.com, doesn't merely synchronize your bookmarks between copies of
the same browser. It synchronizes them between different browser brands,
even if some are running on Windows PCs and some on Macs.

In my tests, Foxmarks worked well, with a few minor
caveats. After using it for five days, I now have exactly the same set of
bookmarks (or Favorites, in Internet Explorer's parlance), arranged in the
same order, on multiple computers -- Windows and Mac -- in a total of 12
different copies of Internet Explorer, Firefox and Safari.

There's a different version of Foxmarks customized
for each of the three main browsers, but each talks to the same
password-protected Web account, which contains the latest version of your
bookmarks. When you add, delete, rename or rearrange any bookmark in any
browser on any of your computers, the Foxmarks software sends the change up
to the Web account. Then, the next time any of your other browsers checks
with the Web account, it receives the change.

For example, in my tests, I bookmarked a Wikipedia
article in Firefox on my Dell running Windows Vista. Foxmarks then caused
that same new bookmark to appear in Internet Explorer on the same Dell, and
in both Firefox and Safari on my Apple Macintosh computer. And, on each
machine, the new bookmark for the Wikipedia article was in the same
location.

In another case, I changed the order of two
bookmarks in the Bookmarks Bar in Safari on one of my Macs, and the same
re-ordering was replicated on a Windows PC in the Links Toolbar of IE and in
the Bookmarks Toolbar of Firefox.

If you don't want exactly the same set of bookmarks
on all your machines, you can set up different profiles with different
bookmarks for your work and home computers.

You can access the password-protected Web site
containing your bookmarks from any PC, even if it isn't one of yours, and
can view a customized version of this site via the browser on an iPhone or
other smart phone. You can even set up a mobile profile that will show you
just a subset of your bookmarks in your phone's Web browser, though you
can't sync bookmarks to and from a phone.

From the Web, you can alter your bookmarks, and
these changes will then be pushed down to the browsers on your computers.
You also can share bookmarks with others via email or an RSS feed.

There are other Web-based repositories of
bookmarks, notably a service called Delicious. But none that I know of
automatically synchronizes bookmarks among browsers and computers, which is
the main function of Foxmarks.

Foxmarks has another feature: It can also sync
stored passwords for Web sites you frequently visit. But this trick works
only in Firefox, and in my tests didn't work properly all the time.

The software has a few other limitations and
glitches. The Internet Explorer version is still labeled a beta, or test,
version because it still produces occasional syncing errors, especially in
Vista. That was true in my tests, and I'd be wary of using it with Vista,
though it performed solidly in Windows XP. It works reliably only with
Internet Explorer 6 or 7, not the pre-release version of Internet Explorer
8, which the company isn't yet supporting.

On the Mac, Foxmarks works only with the current
Leopard version of the operating system and the current version 3 of Safari.
It doesn't work with the Windows version of Safari.

And syncing isn't instant. It can take as long as
an hour for each computer to check with the Web site and get the changes.

The company plans to keep Foxmarks free, but is
hoping to make money from future, unspecified products.

Foxmarks is a clever, well-done product that can
help users of multiple computers and multiple browsers to keep their Web
lives in order.

Dipping a toe into
the real-estate market these days can feel a lot
like taking your car to the mechanic: If you don't
know what you're doing and don't trust the
professional you hired, you may feel like someone is
taking advantage of you. Thankfully, the Web's
ability to demystify intimidating topics has brought
what was once considered insider real-estate
knowledge to the masses.

This week, I tested
Trulia.com, a real-estate
site that's geared toward helping people who are
ready to buy. Trulia combines a simple approach to
real estate that anyone can grasp, with enough
market stats to excite number-crunching types. It
also offers a community where regular users can ask
200,000 real-estate professionals questions without
fear of being hounded by agents because their emails
are hidden.

Trulia has been around since
2005, but started out as a
site that only posted local
real-estate listings in
California and New York.
After expanding to the
national market in 2006, it
added other features like
pricing heat maps
(color-coded to indicate
prices in an area),
comparable listings, an
online community and
automatically generated
newsfeeds about specific
properties and areas. Last
summer, Trulia went mobile
with a free iPhone app that
uses GPS to find nearby open
houses.

Starting Wednesday, Trulia
will offer CompareIt, a tool
that lets users choose five
properties for sale to
directly compare with one
another. Before now, Trulia
just generated a list of
comparable properties that
sold or are for sale at the
bottom of a listing.

I only used Trulia for a
week, and I'm not a typical
buyer since I was just
looking -- for now. But I
got a lot out of the site,
especially by browsing maps
of neighborhoods that I know
well (I'm picky about my
preferred location) and
asking questions of the
Trulia community. Its iPhone
app listed nearby open
houses according to my
search criteria and also
worked on my iPod touch as
long as I was in a Wi-Fi
zone.

Another big plus to Trulia
is Newsfeed, a list that
shows up on the home page
with content that's
automatically generated and
personalized according to
your past search locations.
It is updated every day and
spits out stats like the
number of price reductions,
open houses and new listings
in an area. It shows an
area's average listing
price, median sales price,
number of foreclosures and
average price per square
foot, among other things.
These data are a boon for
people who don't have the
time or inclination to look
this stuff up, and it
aggregates the data into one
intelligible, quick
snapshot.

I found some flaws in Trulia,
like the way it accidentally
listed a property that was
sold five months earlier.
Trulia said it relies on
partners for accurate
listings, and those partners
get their data from Multiple
Listing Services or local
brokers and agents,
therefore Trulia's data are
only as good as its
partners'. (At least one
other real-estate site also
accidentally listed the
already-sold condo for
sale.) Another problem
occurred when I tried to use
the CompareIt chart on
Washington, D.C.,
properties; Trulia said the
tool doesn't work for D.C.
due to a bug that it hopes
to fix. Finally, properties
saved on the iPhone app
won't transfer to your
Trulia Web site account. The
company says it hopes to fix
the iPhone issue.

One of
Trulia's competitors is
Zillow.com,
which
displays its own price
estimates for all houses in
the U.S. (for sale or not)
to give people an idea of
the real-estate value in an
area. The two sites are
similar in some ways: Both
show heat maps, display data
about nearby schools, have
mortgage calculators and use
online communities to answer
questions. But Zillow
doesn't offer a stat-packed
Newsfeed or an iPhone app
like Trulia.

After browsing through
Trulia, I found a variety of
properties that suited my
target price range and
location preferences. One
place had lots of big
windows and a renovated
kitchen, according to the
photos and information
listed on its detailed
Trulia Web page. A shortcut
on the page made it easy for
me to share this place with
three friends to see what
they thought. I even posed a
question to the Trulia
community about the
property: Does this unit
have a private entrance, or
does it share an entrance
with the five other units in
the building?

Ironically, this was the
property that was already
sold, as I found out when a
real-estate agent responded
to my question. It took him
just 15 minutes (Trulia says
this is within five minutes
of the average response
time) to post a response
saying that he was familiar
with the listing and that
the place sold five months
earlier. Trulia has since
updated this property's
status.

Other questions that I asked
of the community were
answered within 20 minutes.
In one instance, I asked a
general question about the
best time of year to buy in
Washington, D.C., and three
real-estate agents responded
almost immediately; two were
from my area and offered
their advice -- and their
services -- but one from
Florida chimed in simply to
offer some encouragement.
Each responder was clearly
identified with a name,
classification (i.e.
real-estate pro) and photo.
Within a couple hours, four
more people responded.

These questions and answers
are shared with everyone on
Trulia, and I clicked on a
thumbs-up icon to vote for
the answer I found most
helpful.

Email alerts can be set up
through Trulia so you're
notified if a property you
like dips below a certain
price, or if there are new
blog posts about certain
categories like financing,
crime or environmentally
friendly properties.

The CompareIt tool worked to
see how properties
(excluding those in D.C.)
stacked up against one
another, up to five at a
time. These charts arm
people with more statistics
and (likely) more
negotiating power.

The real-estate world can be
intimidating, now more than
ever. Though sites like
Trulia won't solve this
problem completely, they
could make the weighty
decision of buying a house a
little bit easier.

Some comparative nine-month academic year salaries recently released by
the AACSBNote that major research university salaries considerably higher than
average while salaries in many private universities are much lower as are
salaries in state universities that are not flagship research universities. The
results for accounting and taxation new assistant professors primarily reflects
the downward trend of doctoral graduates in accounting, auditing, and taxation
in the past two decades ---
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

The Annual
AACSB salary
survey is the definitive source for business school faculty salaries. Here's
the most important table from the report - it shows the mean salaries for
new doctorates for the major business disciplines

The figures
above are
for 9-month salaries. At research schools, summer research support can add
another 10-20% to that, and there are also opportunities to pick up
additional $$ teaching over the summer. However, at teaching oriented
schools, there typically isn't summer
support,
and summer teaching money is also much lower.

For years, Finance professors got the highest salaries across all business
disciplines. That's changed in the last few years, with accounting salaries
pulling ahead. The increase in accounting new-hire salaries is likely due to
smaller numbers of accounting
PhD's being
graduated and a lot of retirements in their field. But still, $120K isn't
bad.

Click
here for the free executive summary (you can also
get the full report, but it'll cost you).

February 20, 2009 reply from Bob Jensen

Hi Jagdish,

You wrote:"The shortage of accounting faculty is contrived by us
to protect our wages."

I agree with most of what you said in your message. However, I don’t
think the decline in accountancy doctoral graduates over the past two
decades was contrived in any kind of conspiracy to create barriers to entry
for purposes of higher salaries. The causes of accounting PhD shortages are
many and complicated, but none of them were intended to make accounting
professors the highest paid professors in the academy.

Part of the cause of a shortage was the increase in demand for accounting
professors. When the big firms commenced adding internships to senior
accounting majors, accounting became much more popular as an undergraduate
major. The professorial supply just did not increase with this demand.

One of the main causes of a shortage of accountancy PhDs is the
time-to-degree. A top economics undergraduate can get a PhD in economics in
seven years of college. The same is possible in finance, marketing, and
management. Law school typically takes three years after obtaining an
undergraduate degree.

In accounting we now require 150 credits to take the CPA examination, so
most of our graduates now get a masters degree with almost no courses in for
academic research. If a statistics course is required it generally has a
coloring book for a textbook.

In addition our doctoral programs prefer to admit candidates with work
experience in accountancy. So now we’re talking six or more years before
admitting a doctoral student. Then students week in mathematics, statistics,
econometrics, and psychometrics take about two years of such courses.
Students who manage to get admitted without much accounting, often foreign
students, take about two years of undergraduate accounting. Then there’s the
additional time for doctoral seminars in accounting research, financial
research, and behavioral research. All told a doctoral program in
accountancy takes at least five years and often six years. What is six years
plus five years? That is just a minimum. Most of our accounting professors
today probably did not complete their accountancy PhD degrees before they
were almost 30 years old except for the oldsters who did not have to earn
150 credits to sit for the CPA examination along the way.

BYU recognized this problem and created a masters degree program for
students who are pretty certain that they want to eventually be admitted to
a doctoral program. The BYU masters program won an AAA Innovation in
Accounting Education annual award. This masters program is intended to
provide students with the research course prerequisites for doctoral studies
such that the time in a doctoral program should, in theory, be reduced to
three years. You can read about BYU’s award winning PhD Prep Program at
http://phdprep.byu.edu/index.php?title=Main_Page
If students has a sufficient amount of accountancy as undergraduates, that
can also take the CPA examination with this masters degree.

Another barrier to entry in accountancy doctoral programs is that the
accountics research professors hijacked the prestigious doctoral programs
and all the other doctoral programs in North America thought that it was
necessary to clone the accountancy doctoral programs at Chicago, Stanford,
Rochester, Cornell, Northwestern, Illinois, Texas, USC, UCLA, and
Cal-Berkeley. Hence all accountancy programs became highly mathematical
social science programs in mathematics, econometrics, and psychometrics.
Practicing CPAs who contemplate returning to a university for an accountancy
PhD are frequently turned off by having to get a social science PhD in the
name of accountancy/accountics. I’ve already written much about this problem
at
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

The bottom line is that I don’t think that the decline in the number of
accountancy doctoral graduates in North America was contrived for purposes
of keeping accounting professor salaries high. The decline was caused by
lengthening the time to the CPA (150 credits), a desire for work experience
for doctoral program admission, and upping the requirements for mathematics,
statistics, econometrics, and psychometrics if virtually all North American
doctoral programs in accountancy.

There are of course other factors to be considered. Accounting careers in
CPA firms and corporations became increasingly attractive. For example, all
the Big Four accounting firms now place in the top ten organizations as
desirable places to work. CPA firms in particular strived to become more
accommodating to parents who seek more time to care for children. In the age
of networking, more and more clients can be served from work at home. Hence,
many accounting workers are less frustrated on the job and are less inclined
to give up five or more years of their lives in a doctoral program.

Business school graduates in non-accounting specialties often have more
trouble getting jobs. Even in the Wall Street boom times, most graduates in
finance could not get plumb jobs on Wall Street and had to settle for
less-than-exciting local bank jobs or become stock brokers living on
commission income. Those graduates were more inclined to come back to
college for doctorates in economics, finance, marketing, management, and
MIS. Some regretted later on that they had not been accounting majors.

It’s tough late in life to come back and take all those accounting
undergraduate courses to get back on track in accounting. But Finley Graves
did it after becoming a PhD in German Literature. He then took the time and
trouble to earn a second PhD in Accounting and is now a terrific accounting
professor.

From the U.S. Postal Service to the Executive
Office of the President, thousands of federal workers have not paid their
2007 federal income taxes.

The Internal Revenue Service is trying to collect
billions of dollars in unpaid taxes from nearly half a million federal
employees. According to IRS records, 171,549 current federal workers did not
voluntarily pay their federal income taxes in 2007. The same is true for
37,752 active duty military and nearly 200,000 retired civilian and military
personnel.

Documents obtained by WTOP through the Freedom of
Information Act show 449,531 federal employees and retirees did not pay
their taxes for a total of $3,586,784,725 in taxes owed last year.

Each year the IRS tracks the voluntary compliance
rate of all federal workers and retirees. The percentage of employees and
retirees who are delinquent has gone up and down over the past five years,
but the amount unpaid has increased each year topping $3.5 billion for the
first time in 2007.

The agency with the most delinquent employees is
the U.S. Postal Service. With more than 747,000 employees, the postal
service is the largest employer in the federal government, but with a 4.16
percent delinquency rate, it is a full 1 percent above the average
compliance rate this year.

The IRS would not provide comparable data for the
general population. But a spokesperson for the IRS did supply the
delinquency rate for IRS employees -- less than 1 percent. The IRS is the
only federal agency where an employee can be fired for not paying his taxes.

The Executive Office of the President, which
includes the White House, has 58 employees who did not pay $319,978.

The Federal Housing Finance Board comes in as the
agency with the best compliance rate of all agencies with 100 or more
employees. The FHFB had four of its 134 employees on the list of
delinquents, three of them have now entered into voluntary payment plans
with the IRS.

Other notable agencies with high delinquency rates
include the Smithsonian Institution, where nearly 5.5 percent of the
employees didn't pay their taxes. On Capitol Hill, more than 1,000 workers
are on the list. The Government Printing Office has the highest percentage
of delinquent employees with 7.23 percent.

In what officials caution is now a dangerous and
even deadly crime wave, Phoenix, Arizona has become the kidnapping capital
of America, with more incidents than any other city in the world outside of
Mexico City and over 370 cases last year alone. But local authorities say
Washington, DC is too obsessed with al Qaeda terrorists to care about what
is happening in their own backyard right now.

We're in the eye of the storm," Phoenix Police
Chief Andy Anderson told ABC News of the violent crimes and ruthless tactics
spurred by Mexico's drug cartels that have expanded business across the
border. "If it doesn't stop here, if we're not able to fix it here and get
it turned around, it will go across the nation," he said.

With consumers shutting their wallets and corporate
revenues plunging, the business landscape may start to resemble a graveyard
in 2009. Household names like Circuit City and Linens 'n Things have already
perished. And chances are, those bankruptcies were just an early warning
sign of a much broader epidemic.

Moody's Investors Service, for instance, predicts
that the default rate on corporate bonds - which foretells bankruptcies -
will be three times higher in 2009 than in 2008, and 15 times higher than in
2007. That could equate to 25 significant bankruptcies per month.

We examined ratings from Moody's and data from
other sources to develop a short list of potential victims that ought to be
familiar to most consumers. Many of these firms are in industries directly
hit by the slowdown in consumer spending, such as retail, automotive,
housing and entertainment.

But there are other common threads. Most of these
firms have limited cash for a rainy day, and a lot of debt, with large
interest payments due over the next year. In ordinary times, it might not be
so hard to refinance loans, or get new ones, to help keep the cash flowing.
But in an acute credit crunch it's a different story, and at companies where
sales are down and going lower, skittish lenders may refuse to grant any
more credit. It's a terrible time to be cash-poor.

That's why Moody's assigns most of these firms its
lowest rating for short-term liquidity. And all the firms on this list have
long-term debt that Moody's rates Caa or lower, which means the borrower is
considered at least a "very high" credit risk.

Once a company defaults on its debt, or fails to
make a payment, the next step is usually a Chapter 11 bankruptcy filing.
Some firms continue to operate while in Chapter 11, retaining many of their
employees. Those firms often shed debt, restructure, and emerge from
bankruptcy as healthier companies.

But it takes fresh financing to do that, and with
money scarce, more bankrupt firms than usual are likely to liquidate - like
Circuit City. That's why corporate failures are likely to be a major drag on
the economy in 2009: In a liquidation, the entire workforce often gets axed,
with little or no severance. That will only add to unemployment, which could
hit 9 or even 10 percent by the end of the year.

It's possible that none of the firms on this list
will liquidate, or even declare Chapter 11. Some may come up with unexpected
revenue or creative financing that helps avert bankruptcy, while others
could be purchased in whole or in part by creditors or other investors. But
one way or another, the following 15 firms will probably look a lot
different a year from now than they do today:

Rite Aid.
(Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline:
92%). This drugstore chain tried to boost its performance by acquiring
competitors Brooks and Eckerd in 2007. But there have been some nasty side
effects, like a huge debt load that makes it the most leveraged drugstore
chain in the U.S., according to Zacks Equity Research. That big retail
investment came just as megadiscounter Wal-Mart was starting to sell
prescription drugs, and consumers were starting to cut bank on spending.
Management has twice lowered its outlook for 2009. Prognosis: Mounting
losses, with no turnaround in sight.

Claire's Stores.
(Privately owned; about 18,000 employees.) Leon Black's once-renowned
private-equity firm, the Apollo Group, paid $3.1 billion for this trendy
teen-focused accessory store in 2007, when buyout funds were bulging. But
cash flow has been negative for much of the past year and analysts believe
Claire's is close to defaulting on its debt. A horrible retail outlook for
2009 offers no relief, suggesting Claire's could follow Linens 'n Things -
another Apollo purchase - and declare Chapter 11, possibly shuttering all of
its 3,000-plus stores.

Chrysler.
(Privately owned; about 55,000 employees). It's never a good sign when
management insists the company is not going out of business, which is what
CEO Bob Nardelli has been doing lately. Of the three Detroit automakers,
Chrysler is the most endangered, with a product portfolio that's overreliant
on gas-guzzling trucks and SUVs and almost totally devoid of compelling
small cars. A recent deal with Fiat seems dubious, since the Italian
automaker doesn't have to pony up any money, and Chrysler desperately needs
cash. The company is quickly burning through $4 billion in government
bailout money, and with car sales down 40 percent from recent peaks,
Chrysler may be the weakling that can't cut it in tough times.

Dollar Thrifty Automotive Group.
(DTG; about 7,000 employees; stock down 95%). This car-rental company is a
small player compared to Enterprise, Hertz, and Avis Budget. It's also more
reliant on leisure travelers, and therefore more susceptible to a downturn
as consumers cut spending. Dollar Thrifty is also closely tied to Chrysler,
which supplies 80 percent of its fleet. Moody's predicts that if Chrysler
declares Chapter 11, Dollar Thrifty would suffer deeply as well.

Realogy Corp.
(Privately owned; about 13,000 employees). It's the biggest real-estate
brokerage firm in the country, but that's a bad thing when there are
double-digit declines in both sales and prices, as there were in 2009.
Realogy, which includes the Coldwell Banker, ERA, and Sotheby's franchises,
also carries a high debt load, dating to its purchase by the Apollo Group in
2007 - the very moment when the housing market was starting to invert from a
soaring ride into a sickening nosedive. Realogy has been trying to refinance
much of its debt, prompting lawsuits. One deal was denied by a judge in
December, reducing the firm's already tight wiggle room.

Station Casinos.
(Privately owned, about 14,000 employees). Las Vegas has already been
creamed by a biblical real-estate bust, and now it may face the loss of its
home-grown gambling joints, too. Station - which runs 15 casinos off the
strip that cater to locals - recently failed to make a key interest payment,
which is often one of the last steps before a Chapter 11 filing. For once,
the house seems likely to lose.

Loehmann's Capital Corp.
(Privately owned; about 1,500 employees). This clothing chain has the right
formula for lean times, offering women's clothing at discount prices. But
the consumer pullback is hitting just about every retailer, and Loehmann's
has a lot less cash to ride out a drought than competitors like Nordstrom
Rack and TJ Maxx. If Loehmann's doesn't get additional financing in 2009 - a
dicey proposition, given skyrocketing unemployment and plunging spending -
the chain could run out of cash.

Sbarro.
(Privately owned; about 5,500 employees). It's not the pizza that's the
problem. Many of this chain's 1,100 storefronts are in malls, which is a
double whammy: Traffic is down, since consumers have put away their wallets.
Sbarro can't really boost revenue by adding a breakfast or late-night menu,
like other chains have done. And competitors like Domino's and Pizza Hut
have less debt and stronger cash flow, which could intensify pressure on
Sbarro as key debt payments come due in 2009.

Six Flags.
(SIX; about 30,000 employees; stock down 84%). This theme-park operator has
been losing money for several years, and selling off properties to try to
pay down debt and get back into the black. But the ride may end prematurely.
Moody's expects cash flow to be negative in 2009, and if consumers aren't
spending during the peak summer season, that could imperil the company's
ability to pay debts coming due later this year and in 2010.

Blockbuster.
(BBI; about 60,000 employees; stock down 57%). The video-rental chain has
burned cash while trying to figure out how to maximize fees without
alienating customers. Its operating income has started to improve just as
consumers are cutting back, even on movies. Video stores in general are
under pressure as they compete with cable and Internet operators offering
the same titles. A key test of Blockbuster's viability will come when two
credit lines expire in August. One possible outcome, according to Valueline,
is that investors take the company private and then go public again when
market conditions are better.

Krispy Kreme.
(KKD; about 4,000 employees; stock down 50%). The donuts might be good, but
Krispy Kreme overestimated Americans' appetite - and that's saying
something. This chain overexpanded during the donut heyday of the 1990s -
taking on a lot of debt - and now requires high volumes to meet expenses and
interest payments. The company has cut costs and closed underperforming
stores, but still hasn't earned an operating profit in three years. And now
that consumers are cutting back on everything, such improvements may fail to
offset top-line declines, leading Krispy Kreme to seek some kind of relief
from lenders over the next year.

Landry's Restaurants.
(LNY; about 17,000 employees; stock down 66%). This restaurant chain, which
operates Chart House, Rainforest Café, and other eateries, needs $400
million in new financing to finalize a buyout deal dating to last June. If
lenders come through, the company should have enough cash to ride out the
recession. But at least two banks have already balked, leading to downgrades
of the company's debt and the prospect of a cash-flow crunch.

Sirius Satellite Radio.
(SIRI - parent company; about 1,000 employees; stock down 96%). The music
rocks, but satellite radio has yet to be profitable, and huge contracts for
performers like Howard Stern are looking unsustainable. Sirius is one of two
satellite-radio services owned by parent company Sirius XM, which was formed
when Sirius and XM merged last year. So far, the merger hasn't generated the
savings needed to make the company profitable, and Moody's thinks there's a
"high likelihood" that Sirius will fail to repay or refinance its debt in
2009. One outcome could be a takeover, at distressed prices, by other firms
active in the satellite business.

Trump Entertainment Resorts Holdings.
(TRMP; about 9,500 employees; stock down 94%). The casino company made
famous by The Donald has received several extensions on interest payments,
while it tries to sell at least one of its Atlantic City properties and pay
down a stack of debt. But with casino buyers scarce, competition circling,
and gamblers nursing their losses from the recession, Trump Entertainment
may face long odds of skirting bankruptcy.

BearingPoint.
(BGPT; about 16,000 employees; stock down 21%). This Virginia-based
consulting firm, spun out of KPMG in 2001, is struggling to solve its own
operating problems. The firm has consistently lost money, revenue has been
falling, and management stopped issuing earnings guidance in 2008. Stable
government contracts generate about 30 percent of the firm's business, but
the firm may sell other divisions to help pay off debt. With a key interest
payment due in April, management needs to hustle - or devise its own exit
strategy.

For years, business schools have seemed to be
battling for bragging rights over which ones were the most globalized as
they launched far-flung partnerships and programs around the world. But as
more than 400 business deans from 35 countries gathered for a conference
here last week, new questions were being raised about whether the sweeping
globalization of management education amounted to more rhetoric than
reality, and whether, faced with a worldwide economic meltdown, schools can
afford to continue expanding overseas.

“It’s time to stop pretending that we’re doing more
than we really are,” Edward A. Snyder, dean of the University of Chicago's
Booth School of Business, told a packed audience at the annual deans'
meeting of AACSB International: the Association to Advance Collegiate
Schools of Business. “Statements of aspiration are great, but we should
avoid being overly highfalutin in our rhetoric.”

Pankaj Ghemawat, a professor of global strategy at
IESE Business School, a leading international business school run by the
University of Navarra, with campuses in Barcelona and Madrid, offered an
even more skeptical assessment. He argued that most of the international
collaborations business schools have been touting on their Web sites are
limited to student and faculty exchanges, with little meaningful change in
the curriculum.

“If that’s all we do, we risk becoming a
specialized segment of the travel and hospitality industry,” said Mr.
Ghemawat, the author of Redefining Global Strategy: Crossing Borders in a
World Where Differences Still Matter (Harvard Business School Press, 2007).
He also dismissed as "globaloney" the premise that global borders matter
little today in solving the world's business problems. Mr. Ghemawat argued
that the world is, in fact, only "semi-globalized," and that both students
and businesses are misled when regional differences are ignored.

“If you’re an MBA student, what could be more
seductive than being told ‘the world is one, and you’re now perfectly
equipped, once you get your degree, to go out and stamp out global
management problems, wherever they spring up—kind of a global SWAT team.”

The business-schools’ association, which now has
559 accredited members in 32 countries, has emphasized globalization in
recent years. Despite some likely short-term retrenchment in the industry,
the association’s international orientation will remain important over the
long haul, said John J. Fernandes, president of the association.

“We’re not going back to the covered-wagon days,”
he said in an interview. While many fear that the world's deepening economic
crisis will prompt a call for more trade restrictions, “a retreat to
protectionism is a short-term reaction to fear, but in the long run, a
global outlook is key,” Mr. Fernandes said.

No Plan to Withdraw

Some deans whose MBA programs’ reputations are
built on their strong international orientation agree. Hildy Teegen, dean of
the University of South Carolina’s Moore School of Business, said her school
has a responsibility to a state that relies heavily on overseas investment
in its agriculture, manufacturing, textile, and tourism industries.

"In this kind of economic environment, we'll have
to be very strategic in our partnerships, but we have no intention of
pulling back," said Ms. Teegen, who serves, with Mr. Ghemawat and Mr.
Snyder, on the AACSB's globalization committee. "Without foreign trade and
commerce, our state's economy would be devastated."

In the halls, between sessions, deans traded
anecdotes about how the financial crisis has affected their jobs.

Nakiye A. Boyacigiller, management dean at Sabanci
University, in Istanbul, Turkey, handed out business cards, offering to
serve as host to study tours for schools that were still able to sponsor
short trips abroad. She has had to cut back on foreign trips for her own
executive MBA program because students can no longer afford them, or they
are afraid to ask for more time off from their jobs.

Sabanci is one of thousands of business schools
that have sprung up in recent years. Worldwide, about 11,800 schools offer
undergraduate or graduate business degrees, according to the AACSB. More
than 8,000 of those are in Africa, Asia, Australia, and Latin America, and
fewer than 2,000 each are in North America and Europe. Relatively few of the
new programs have been started by leading American business schools, said
Mr. Snyder, the University of Chicago dean.

“Ours is one of the most diffuse, unconcentrated
industries in the world," he told the deans. "I don’t think there’s another
industry on the planet that has responded the way we have to globalization,
with this pattern of many, many start-ups and indigenous growth all over the
world.”

Diminishing Opportunities

Given the worldwide economic meltdown, fewer MBA
programs will be able to recruit students from around the world, educate
them at an overseas campus, and then place them in high-level jobs, Mr.
Snyder said. “The number of good jobs that will justify the cost of bringing
people in will decline,” he added.

Speakers noted that business schools seeking to
expand overseas already face a variety of roadblocks, including regulatory
constraints, resistance from their own universities, and a reluctance to
move faculty members from their home campuses.

But all was not gloom and doom for deans with
expansion on their minds. Blair H. Sheppard, dean of Duke University's Fuqua
School of Business, said Duke is moving ahead this summer with an expanded
version of its "cross-continent MBA," in which students will do much of
their work over the Internet, but also spend periods working and studying at
campuses in Britain, China, India, Russia, and the United Arab Emirates, as
well as on Duke's main campus in North Carolina.

Osama bin Ladenis most likely hiding in the city
of Parachinar in Kurram,
Pakistan, according to the results of a unique
study undertaken by geography professors at UCLA, who used biogeographic
theories in an attempt to pinpoint the terror leader's exact location. In fact,
they've even gone so far as to suggest the three most likely structures where
bin Laden and his entourage may be residing. Maddy Sauer, "Osama Bin Laden's
Hideout Pinpointed? Study Offers New Insights into Terror Leader's Possible
Whereabouts," ABC News, February 18, 2009 ---
http://www.abcnews.go.com/Blotter/story?id=6905490&page=1
Paul Williams forwarded this link.

February 18, 2009 reply from Bob Jensen

Hi Paul,

It's highly likely that we've known and tracked,
since the
Tora Bora entrapment, where Bin Laden is holed up. In fact, a former
head of a Delta Force task force now claims he had a bead on Bin Laden and
was refused permission by the high command to pull the trigger. This was a
most interesting module on CBS Sixty Minutes on October 5, 2008 ---
http://www.cbsnews.com/stories/2008/10/02/60minutes/main4494937.shtml

This begs the question of why people high up in the
military and State Department might prefer that Bin Laden or his myth live
on even if he is already dead. One obvious reason is that Bin Laden or his
myth (if he’s dead) now restrains the most dangerous terror cells that are
in place throughout the world. At the moment the most dangerous terror
organization, certainly not the only one, has a chain of command probably
leading to Bin Laden or his Wizard of Oz-like pretense. Purportedly Bin
Laden eventually admitted that 9/11 was a devastating mistake on his part.

It's a little like a huge labor union. As long as
Samuel Gompers was in charge, many wildcat strikes were quelled by the union
boss himself. Without the union boss, the wildcat strikes might've been
devastating, deadly, and near anarchy. Both industry and the U.S. government
at the time needed Gompers. Of course Gompers was willing to bargain
collectively, which is something that is not likely under Bin Laden.

Interestingly, Bin Laden's power over his fanatical
followers may be due to anticipation that he will someday unleash a
devastating and decisive blow, perhaps with weapons of mass destruction.
This is risky, because with each passing year since 9/11 his most impatient
followers may become increasing disillusioned and less controllable.

A woman medical doctor at the Stanford Medical
School shortly after 9/11 had the best idea of what to do with Bin Laden. We
should kidnap him, whisk him off to a Navy carrier for a sex change
operation, and then return him to as a woman to live among his most
fanatical followers.

Bob Jensen

There's a booger in my burger!
The Stella Awards were inspired by Stella Liebeck. In 1992, Stella, then 79,
spilled a cup of McDonald's coffee onto her lap inside a moving car, burning
herself. A New Mexico jury awarded her $2.9 million in damages (later reduced on
appeal).
Stella Awards ---
http://www.stellaawards.com/

The awards take a light-hearted look at the civil
litigation industry that now costs more than $247 billion (£172bn) a year –
the equivalent of $825 (£574) per person in the US.

They are named after Stella Liebeck of Albuquerque,
New Mexico, who successfully sued McDonald's for $2.86 million (£2m) in 1992
after burning herself on coffee that was "too hot".

Among the cases featured this year was the
Washington lawyer who is suing the dry cleaners who lost his trousers for
$65 million (£45m) on the basis of "mental suffering, inconvenience and
discomfort" and the woman who threw her drink at her boyfriend in a
Philadelphia restaurant then slipped on the spilt liquid, broke her tailbone
and successfully sued for $113,500 (£79,000).

The awards, which were set up seven years ago by
California publisher and columnist Randy Cassingham, also include the case
of Mrs Merv Grazinski of Oklahoma, who sued Winnebago for $1.75 million
(£1.21m) after she crashed her motor home at 70mph while making a sandwich.

She argued the firm failed to inform her not to
leave the wheel when she set it on cruise control.

Kara Walton, of Claymont, Delaware, gained a
mention after she sued the owner of a nightclub for $12,000 (£8,350) because
she fell from the bathroom window she was trying to sneak in through,
knocking out her two front teeth.

Jerry Williams, of Little Rock, Arkansas, was
awarded $14,500 (£10,000) plus medical expenses after being bitten on the
bottom by his next door neighbour's beagle. The dog was on a chain and Mr
Williams had hopped over a fence and repeatedly shot it with a pellet gun.

Criminals had a good year in court. Terrence
Dickson of Bristol, Pennsylvania, won $500,000 (£350,000) from the insurance
company of a family whose home he burgled when he was trapped inside the
garage for eight days, while Carl Truman, 19, of Los Angeles, California,
won $74,000 (£51,500) plus medical expenses when his neighbour ran over his
hand as he tried to to steal his hubcaps.

Kathleen Robertson of Austin, Texas was awarded
$80,000 (£55,700) plus medical costs against the owners of a store when she
tripped over a running toddler and broke her ankle. The toddler was her own
son.

Some lawyers are now warning that the number of
frivolous lawsuits could even increase as the recession drives people to
more inventive moneymaking methods.

California family law specialist Jim Fedalen
warned: "When people are broke they get desperate and I have no doubt we're
going to see a big increase in scams, such as people deliberately planting
nasty objects in their sandwiches then trying to sue the burger joint.

"You'd be amazed at the companies who will shell
out thousands, even when they suspect they're being conned, to avoid the
adverse publicity of a court case. Juries tend to side with the plaintiffs
and damages they sometimes award are in the realms of the ridiculous."

Last week we came to the section on
academic freedom in my course on the law of higher education and I posed
this hypothetical to the students: Suppose you were a member of a law firm
or a mid-level executive in a corporation and you skipped meetings or came
late, blew off assignments or altered them according to your whims, abused
your colleagues and were habitually rude to clients. What would happen to
you?

The chorus of answers cascaded
immediately: “I’d be fired.” Now, I continued, imagine the same scenario and
the same set of behaviors, but this time you’re a tenured professor in a
North American university. What then?

I answered this one myself: “You’d be
celebrated as a brave nonconformist, a tilter against orthodoxies, a
pedagogical visionary and an exemplar of academic freedom.”

My assessment of the way in which some
academics contrive to turn serial irresponsibility into a form of heroism
under the banner of academic freedom has now been at once confirmed and
challenged by events at the University of Ottawa, where the administration
announced on Feb. 6 that it has “recommended to the Board of Governors the
dismissal with cause of Professor Denis Rancourt from his faculty position.”
Earlier, Rancourt, a tenured professor of physics, had been suspended from
teaching and banned from campus. When he defied the ban he was taken away in
handcuffs and charged with trespassing.

What had Rancourt done to merit such
treatment? According to the Globe and Mail, Rancourt’s sin was to have
informed his students on the first day of class that “he had already decided
their marks : Everybody was getting an A+.”

But that, as the saying goes, is only the
tip of the iceberg. Underneath it is the mass of reasons Rancourt gives for
his grading policy and for many of the other actions that have infuriated
his dean, distressed his colleagues (a third of whom signed a petition
against him) and delighted his partisans.

Rancourt is a self-described anarchist and
an advocate of “critical pedagogy,” a style of teaching derived from the
assumption (these are Rancourt’s words) “that our societal structures . . .
represent the most formidable instrument of oppression and exploitation ever
to occupy the planet” (Activist Teacher.blogspot.com, April 13, 2007).

Among those structures is the university
in which Rancourt works and by which he is paid. But the fact of his
position and compensation does not insulate the institution from his
strictures and assaults; for, he insists, “schools and universities supply
the obedient workers and managers and professionals that adopt and apply
[the] system’s doctrine — knowingly or unknowingly.”

It is this belief that higher education as
we know it is simply a delivery system for a regime of oppressors and
exploiters that underlies Rancourt’s refusal to grade his students. Grading,
he says, “is a tool of coercion in order to make obedient people” (rabble.ca.,
Jan. 12, 2009).

It turns out that another tool of coercion
is the requirement that professors actually teach the course described in
the college catalogue, the course students think they are signing up for.
Rancourt battles against this form of coercion by employing a strategy he
calls “squatting” – “where one openly takes an existing course and does with
it something different.” That is, you take a currently unoccupied structure,
move in and make it the home for whatever activities you wish to engage in.
“Academic squatting is needed,” he says, “because universities are
dictatorships . . . run by self-appointed executives who serve capital
interests.”

Rancourt first practiced squatting when he
decided that he “had to do something more than give a ‘better’ physics
course.” Accordingly, he took the Physics and Environment course that had
been assigned to him and transformed it into a course on political activism,
not a course about political activism, but a course in which political
activism is urged — “an activism course about confronting authority and
hierarchical structures directly or through defiant or non-subordinate
assertion in order to democratize power in the workplace, at school, and in
society.”

Clearly squatting itself is just such a
“defiant or non-subordinate assertion.” Rancourt does not merely preach his
philosophy. He practices it.

This sounds vaguely admirable until you
remember what Rancourt is, in effect, saying to those who employ him: I
refuse to do what I have contracted to do, but I will do everything in my
power to subvert the enterprise you administer. Besides, you’re just
dictators, and it is my obligation to undermine you even as I demand that
you pay me and confer on me the honorific title of professor. And, by the
way, I am entitled to do so by the doctrine of academic freedom, which I
define as “the ideal under which professors and students are autonomous and
design their own development and interactions.”

Of course, as Rancourt recognizes, if this
is how academic freedom is defined, its scope is infinite and one can’t stop
with squatting: “The next step is academic hijacking, where students tell a
professor that she can stay or leave but that this is what they are going to
do and these are the speakers they are going to invite.” O, brave new world!

The record shows exchanges of letters
between Rancourt and Dean Andre E. Lalonde and letters from each of them to
Marc Jolicoeur, chairman of the Board of Governors. There is something
comical about some of these exchanges when the dean asks Rancourt to tell
him why he is not guilty of insubordination and Rancourt replies that
insubordination is his job, and that, rather than ceasing his insubordinate
activities, he plans to expand them. Lalonde complains that Rancourt “does
not acknowledge any impropriety regarding his conduct.” Rancourt tells
Jolicoeur that “Socrates did not give grades to students,” and boasts that
everything he has done was done “with the purpose of making the University
of Ottawa a better place,” a place “of greater democracy.” In other words, I
am the bearer of a saving message and those who need it most will not hear
it and respond by persecuting me. It is the cry of every would-be messiah.

Rancourt’s views are the opposite of those
announced by a court in an Arizona case where the issue was also whether a
teaching method could be the basis of dismissal. Noting that the university
had concluded that the plaintiff’s “methodology was not successful,” the
court declared “Academic freedom is not a doctrine to insulate a teacher
from evaluation by the institution that employs him” (Carley v. Arizona,
1987).

The Arizona court thinks of academic
freedom as a doctrine whose scope is defined by the purposes and protocols
of the institution and its limited purposes. Rancourt thinks of academic
freedom as a local instance of a global project whose goal is nothing less
than the freeing of revolutionary energies, not only in the schools but
everywhere.

It is the difference between being
concerned with the establishing and implementing of workplace-specific
procedures and being concerned with the wholesale transformation of society.
It is the difference between wanting to teach a better physics course and
wanting to save the world. Given such divergent views, not only is
reconciliation between the parties impossible; conversation itself is
impossible. The dispute can only be resolved by an essentially political
decision, and in this case the narrower concept of academic freedom has won.
But only till next time.

Stanley Fish is the Davidson-Kahn Distinguished
University Professor and a professor of law at Florida International
University, in Miami, and dean emeritus of the College of Liberal Arts and
Sciences at the University of Illinois at Chicago. He has also taught at the
University of California at Berkeley, Johns Hopkins and Duke University. He
is the author of 10 books. His new book on higher education, "Save the World
On Your Own Time," has just been published.

More than a few times in these
columns I have tried to deflate the balloon of academic freedom by
arguing that it was not an absolute right or a hallowed principle,
but a practical and limited response to the particular nature of
intellectual work.

Now, in a new book —
“For the Common Good: Principles of American Academic Freedom,”to be published in 2009 — two
distinguished scholars of constitutional law, Matthew W. Finkin and
Robert C. Post, study the history and present shape of the concept
and come to conclusions that support and deepen what I have been
saying in these columns and elsewhere.

The authors’ most important
conclusion is presented early on in their introduction: “We argue
that the concept of Academic freedom . . . differs fundamentally
from the individual First Amendment rights that present themselves
so vividly to the contemporary mind.” The difference is that while
free speech rights are grounded in the constitution, academic
freedom rights are “grounded . . . in a substantive account of the
purposes of higher education and in the special conditions necessary
for faculty to fulfill those purposes.”

In short, academic freedom, rather
than being a philosophical or moral imperative, is a piece of policy
that makes practical sense in the context of the specific task
academics are charged to perform. It follows that the scope of
academic freedom is determined first by specifying what that task is
and then by figuring out what degree of latitude those who are
engaged in it require in order to do their jobs.

If the mission of the enterprise
is, as Finkin and Post say, “to promote new knowledge and model
independent thought,” the “special conditions” necessary to the
realization of that mission must include protection from the forces
and influences that would subvert newness and independence by either
anointing or demonizing avenues of inquiry in advance. Those forces
and influences would include trustees, parents, donors, legislatures
and the general run of “public opinion,” and the device that
provides the necessary protection is called academic freedom. (It
would be better if it had a name less resonant with large
significances, but I can’t think of one.)

It does not, however, protect
faculty members from the censure or discipline that might follow
upon the judgment of their peers that professional standards have
either been ignored or violated. There is, Finkin and Post insist,
“a fundamental distinction between holding faculty accountable to
professional norms and holding them accountable to public opinion.
The former exemplifies academic freedom: the latter undermines it.”

Holding faculty accountable to
public opinion undermines academic freedom because it restricts
teaching and research to what is already known or generally
accepted.

Holding faculty accountable to
professional norms exemplifies academic freedom because it
highlights the narrow scope of that freedom, which does not include
the right of faculty “to research and publish in any manner they
personally see fit.”

Indeed, to emphasize the
“personal” is to mistake the nature of academic freedom, which
belongs, Finkin and Post declare, to the enterprise, not to the
individual. If academic freedom were “reconceptualized as an
individual right,” it would make no sense — why should workers in
this enterprise have enlarged rights denied to others? — and support
for it “would vanish” because that support, insofar as it exists, is
for the project and its promise (the production of new knowledge)
and not for those who labor within it. Academics do not have a
general liberty, only “the liberty to practice the scholarly
profession” and that liberty is hedged about by professional norms
and responsibilities.

I find this all very congenial.
Were Finkin and Post’s analysis internalized by all faculty members,
the academic world would be a better place, if only because there
would be fewer instances of irresponsible or overreaching teachers
invoking academic freedom as a cover for their excesses.

I do, however, have a quarrel with
the authors when they turn to the question of what teachers are free
or not free to do in the classroom.

Finkin and Post are correct when
they reject the neo-conservative criticism of professors who bring
into a class materials from disciplines other than the ones they
were trained in. The standard, they say, should be “whether material
from a seemingly foreign field of study illuminates the subject
matter under scrutiny.”

Just so. If I’m teaching poetry
and feel that economic or mathematical models might provide a
helpful perspective on a poem or body of poems, there is no good
pedagogical reason for limiting me to models that belong properly to
literary criticism. (I could of course be criticized for not
understanding the models I imported, but that would be another
issue; a challenge to my competence, not to my morality.)

But of course what the
neo-conservative critics of the academy are worried about is not
professors who stray from their narrowly defined areas of expertise;
they are worried about professors who do so in order to sneak in
their partisan preferences under the cover of providing students
with supplementary materials. That, I think, is a genuine concern,
and one Finkin and Post do not take seriously enough.

Responding to an expressed concern
that liberal faculty too often go on about the Iraq War in a course
on an entirely unrelated subject, Finkin and Post maintain that
there is nothing wrong, for example, with an instructor in English
history “who seeks to interest students by suggesting parallels
between King George III’s conduct of the Revolutionary War and
Bush’s conduct of the war in Iraq.”

But we only have to imagine the
class discussion generated by this parallel to see what is in fact
wrong with introducing it. Bush, rather than King George, would
immediately become the primary reference point of the parallel, and
the effort to understand the monarch’s conduct of his war would
become subsidiary to the effort to find fault with Bush’s conduct of
his war. Indeed, that would be immediately seen by the students as
the whole point of the exercise. Why else introduce a contemporary
political figure known to be anathema to most academics if you were
not inviting students to pile it on, especially in the context of
the knowledge that this particular king was out of his mind?

Sure, getting students to be
interested in the past is a good thing, but there are plenty of ways
to do that without taking the risk (no doubt being courted) that
intellectual inquiry will give way to partisan venting. Finkin and
Post are right to say that “educational relevance is to be
determined . . . by the heuristic purposes and consequences of a
pedagogical intervention”; but this intervention has almost no
chance of remaining pedagogical; its consequences are predictable,
and its purposes are suspect

Still, this is the only part of
the book’s argument I am unable to buy. The rest of it is right on
target. And you just have to love a book — O.K., I just have to love
a book — that declares that while faculty must “respect students as
persons,” they are under no obligation to respect the “ideas held by
students.” Way to go!

YouTube began testing a new feature thatlets
users download videosposted to the site from
partner institutions — including colleges — rather than just watching the
videos in a streaming format. That means people can grab lectures from Duke
and Stanford Universities and several institutions in the University of
California system to watch any time, with or without an Internet connection.

YouTube partners have the option of charging users
for such downloads, but all the universities have offered to make their
lecture videos free instead, using
Creative Commons licensesthat restrict usage to
non-commercial purposes and prohibit derivative work.

Some universities already allow users to download
lectures through campus Web sites or through Apple’s iTunesU using Creative
Commons licenses. But Obadiah Greenberg, a strategic-partner manager at
YouTube, said in an interview this week that the site’s new feature would
allow an even larger audience to take advantage of such content.

Scott Stocker, director of Web communications for
Stanford, said the university had made audio and video content available for
download through Apple’s iTunesU since 2007. But Mr. Stocker said that
iTunesU and YouTube attract different audiences: Users of iTunesU generally
search out content to download to their devices, while YouTube users stumble
upon content through videos embedded on blogs or links shared among friends.

Mr. Stocker said Stanford had no plans to charge
money for its video downloads, since the university sees giving away
lectures as part of its educational mission.

Other YouTube partners participating in the test
includea weekly Web
showhosted by Dan Brown of Lincoln, Neb., and
Khan Academy, a
non-profit organization that offers video lectures on subjects like physics
and finance for 99 cents per download.

We are always looking for ways to
make it easier for you to find, watch, and share videos. Many of you have
told us that you wanted to take your favorite videos offline. So we've
started working with a few partners who want their videos shared universally
and even enjoyed away from an Internet connection.

Many video creators on YouTube want their work to be seen far and wide. They
don't mind sharing their work, provided that they get the proper credit.
Using
Creative Commons licenses,we're giving our
partners and community more choices to make that happen. Creative Commons
licenses permit people to reuse downloaded content under certain conditions.

We're also testing an option that gives video owners the ability to permit
downloading of their videos from YouTube. Partners could choose to offer
their video downloads for free or for a small fee paid through
Google Checkout. Partners can set prices and
decide which license they want to attach to the downloaded video files (for
more info on the types of licenses, take a look
here).
For example, universities use YouTube to share lectures and research with an
ever-expanding audience. In an effort to promote the sharing of information,
we are testing free downloads of YouTube videos from
Stanford,
Duke,
UC Berkeley,
UCLA, and
UCTV(broadcasting programs from throughout
the UC system). YouTube users who are traveling or teachers who want to show
these videos in classrooms with limited or no connectivity should find this
particularly useful.

A small number of other YouTube partners, including
khanacademy,
householdhacker and
pogobat, are also participating in this test
as an additional distribution and revenue-generating tool.

So how do these downloads work? The video watch pages of the participating
partners link to the download option below the left-hand corner of the
video. To help you keep track of the videos you have previously purchased,
we have created a new "My Purchases" tab
under "My Videos."

If you are a partner who is interested in participating, you can find out
more about the test and enter your information here.

The
Cybermetrics Lab, a research group based in Spain, has released
the latest edition of its biannual
Webometrics Ranking of World Universities,which seeks to measure “the performance
and impact of universities through their Web presence.”

According
to the group’s Web site, the rankings—which Cybermetrics began
publishing in 2004—were originally conceived as a way of
promoting open access to academic materials online. It comes as
no surprise, then, that the Massachusetts Institute of
Technology, whose
OpenCourseWare projectboasts the
world’s largest collection of free teaching materials, tops the
list.

Stanford
University, Harvard University, the University of California at
Berkeley, and Cornell University
round out the top five. American universities are the strongest
performers: The University of Toronto, at No. 24, is the
highest-ranked institution from outside the United States, and
the University of Cambridge, at No. 28, registered as the
highest-ranked European institution.

The
Webometrics rankings score each university on
four criteria,including the number of
links to the institution’s Web site from other sites. These
“inlinks” are ostensibly a good way of evaluating a site’s
general impact on the Web community.

A new kind of hybrid vehicle being developed at the
Swiss Federal Institute of Technology in Zurich could save almost as much
fuel as today's gas-electric hybrids, but at a fraction of the cost. Swiss
researchers will present the results of experiments with a test version of
the new system at the Society for Automotive Engineer's Congress in April.

Conventional gas-electric hybrids use batteries to
store energy recovered during braking, which would otherwise be wasted as
heat. They later use that energy to drive an electric motor that assists the
car's gas engine. But the high-cost of batteries, and the added cost of
including two forms of propulsion--an electric motor and a gasoline
engine--make such hybrids expensive. This has slowed their adoption and
limited their impact on overall greenhouse gas emissions from vehicles.

Lino Guzzella, a professor of mechanical
engineering at the Swiss Institute, is developing a hybrid that requires no
battery or electric motor. Instead, it stores energy by using the engine's
pistons to compress air. That air can later be released to drive the pistons
and propel the vehicle along. Guzzella says that the system will add only
about 20 percent to the cost of a conventional engine, whereas the extra
components required in hybrid electric vehicles can add 200 percent to the
cost. Computer simulations suggest that the design should reduce fuel
consumption by 32 percent, which is about 80 percent of the fuel-savings of
gas-electric hybrids, he says. Initial experiments have demonstrated that
the design can be built.

The overall idea of air (or pneumatic) hybrids
isn't new, but making them efficient has been challenging. "It's difficult
to keep the [energy] losses involved in moving air around small enough that
it looks attractive," says John Heywood, a professor of mechanical
engineering at MIT who has also worked on developing air hybrids. What's
more, tanks of compressed air store far less energy than batteries, severely
limiting the fuel savings in typical air-hybrid designs, says Doug Nelson, a
professor of mechanical engineering at Virginia Tech. This is one of the
major drawbacks of cars designed to run solely on compressed air.

Guzzella's new air-hybrid design makes use of
advanced control systems to more precisely control the flow of air,
improving overall efficiency. To overcome limited storage capacity, the
design relies less on capturing energy from braking than other hybrids, and
more on another approach to saving energy: using pneumatic power to boost
the performance of smaller, more efficient gasoline engines.

Conventional vehicles use engines that can provide
far more power than is needed for cruising--this excess power is used during
acceleration and for sustaining very high speeds. But these engines are
inefficient, especially since most of the time they operate at far lower
loads than they were designed for.

I am writing on behalf of a group of investors
numbering several tens of thousands in Hong Kong who believe they have been
duped by Lehman Brothers in purchasing what is described as ‘credit-linked’
notes (a small portion is variously described as ‘equity-linked note’ and
the like).

The complexity of the products only gradually came
to light after the bankruptcy of Lehman Brothers last September, followed by
the rather irresponsible conduct manifested by the refusal of the
distributor banks and the regulators (the Securities and Futures Commission
and the Hong Kong Monetary Authority) to answer queries relating to the
approval and sales of such Notes.

The Notes were being sold indiscriminately to the
public without any regard to suitability of the particular investor. By a
rough estimate (profiles of the victimized investors have been withheld by
the government), about 40% of the entire body of investors are retirees,
elderly, uneducated or suffering from other handicaps.

We believe that the so-called credit-linked notes
actually conceal poor quality synthetic CDO described as ‘underlying
security’. Ostensibly the Notes are advertised as ‘credit-linked’ to a
handful of well-known companies, but this is no more than a façade in order
to obscure the all-important role played by the portfolios of credit
derivatives. I attach the issue prospectus and programme prospectus of one
of the many series for your ease of reference.

From your remarkable wealth of knowledge in white
collar fraud, I wonder if you would be interested in having a look of the
attachment and considering adding this scam in your website. Being mere
amateurs in finance, we have been struggling to unravel the fraud without
any assistance from the banks and the regulators. We would be most grateful
for any advice from you such as similar deceptive practice
(mischaracterizing highly risky derivatives as ‘security’ in order to
mislead the investors in this instance), or any other aspects that you may
consider we should pay attention to.

No details about the ‘underlying security’ was
given in the prospectuses and Lehman sought to excuse the non-disclosure by
asserting that final decision had not been made when the prospectus went to
print. The intervals between each series of the Notes could be as short as
one month which renders the assertion implausible. After all, some issuers
of similar notes have adopted the practice of revealing an ‘expected
portfolio’ and cognate details. We consider this a key aspect of intentional
withholding of information. Your opinion on this would be very much
appreciated.

NCAA Says You Can Only Gamble on
a Few Long Shots On Wednesday, the NCAA’s Division I
Committee on Infractions took the unusual step (at the
instigation of Eastern Washington officials themselves) of
dictating admissions policies at one of its member institutions.
In
punishing Eastern Washingtonfor
major violations in its football program, the NCAA panel upped
the ante on a penalty the university had imposed on itself,
limiting the institution to admitting no more than three
academic “non-qualifiers” a year for the next three years, and
prohibiting Eastern Washington outright from recruiting
community college transfers who do not meet the academic
eligibility standards during that time period.Doug Lederman, "Too Many Academically Challenged
Athletes," Inside Higher Ed, February 12, 2009 ---
http://www.insidehighered.com/news/2009/02/12/ncaa

Yes Bohunk: It's Still Possible to Sign Up for Basket Weaving
Athletes Seek Out Professors Who Will Pass Almost Any AthleteWatkins says it is all too common to see athletes
grouped in certain departments or programs under the sheltering wings of faculty
members who appear to care more about their success on the courts, rinks and
fields than in the classroom. Faculty members are often the most vocal critics
of favoritism for athletes (the issues at Auburn were raised by one whistle
blowing sociology professor against another), he says, but it is frequently
professors who are responsible for the favoritism in the first place.
Rob Capriccioso, "Tackling Favoritism for Athletes," Inside Higher Ed, July 20,
2006 ---
http://www.insidehighered.com/news/2006/07/20/sports

While accusations of widespread abuse like
that alleged at Auburn are unusual, “clustering” of athletes — in
which large numbers of athletes at an institution major in a
particular program or department, out of proportion to other
students at the college — is common.
A 2002-3 analysisby USA Today
found that a large percentage of football players at Auburn and Duke
University (a quarter and a third of the teams, respectively)
majored in sociology, while tiny fractions of all undergraduates
majored in that field. At North Carolina State, the University of
Michigan and University of Southern Mississippi, the most popular
major among football players tended to be sports management, also
far out of proportion with their peer students.

Richard M. Southall, an assistant professor
of sport and leisure studies at the University of Memphis, says that
his own sports and leisure area is the second most popular major for
athletes, just behind those who attend the institution’s University
College, an “individualized and interdisciplinary” degree program.

Continued in article

Question
How do athletes at Auburn University find a way to ace sociology without
having to go to class?

"Top Grades and No Class Time for Auburn Players," by Pete Thamal,
The New York Times, July 14, 2006 ---
Click Here

Professor Petee’s directed-reading classes,
which nonathletes took as well, helped athletes in several sports
improve their grade-point averages and preserve their athletic
eligibility. A number of athletes took more than one class with
Professor Petee over their careers: one athlete took seven such
courses, three athletes took six, five took five and eight took
four, according to records compiled by Professor Gundlach. He also
found that more than a quarter of the students in Professor Petee’s
directed-reading courses were athletes. (Professor Gundlach could
not provide specific names because of student privacy laws.)

The Auburn football team’s performance in
the N.C.A.A.’s new rankings of student athletes’ academic progress
surprised many educators on and off campus. The team had the highest
ranking of any Division I-A public university among college
football’s six major conferences. Over all among Division I-A
football programs, Auburn trailed only Stanford, Navy and Boston
College, and finished just ahead of Duke.

Among those caught off guard by Auburn’s
performance was Gordon Gee, the chancellor of Vanderbilt, a fellow
university in the Southeastern Conference and its only private
institution. Vanderbilt had an 88 percent graduation rate in 2004,
compared with Auburn’s 48 percent, yet finished well behind Auburn
in the new N.C.A.A. rankings.

“It was a little surprising because our
graduation rates are so much higher,” Mr. Gee said. “I’m not quite
certain I understood that.”

The N.C.A.A. cannot comment on specific
academic cases. But when asked how much 18 players taking 97 credit
hours could affect a football team’s academic standing, Thomas S.
Paskus, the N.C.A.A.’s principal research scientist, said it would
be likely to lift the number. He added that it would be difficult to
gauge how much the classes helped the academic ranking.

In the spring of 2005, Professor Gundlach
confronted Professor Petee, to whom he reported, about the
proliferation of directed-reading courses. That spring, the
university’s administration told Professor Petee he was carrying too
many of the classes. Far fewer have been offered since.

There are a number of RSS feed readers out there,
and this may be one of the best. This version of ReadAir allows users to
access all of their feeds simply, and they can also search all of them by
keyword and look around for shared stories. While ReadAir doesn't have the
trend analysis feature that some users have come to expect from Google
Reader, it's still a very valuable tool. This version is compatible with
computers running Mac OS X 10.3 and newer.

Google Earth has gone underwater with this latest
iteration of their popular Earth-roaming application. Along with traveling
the usual roads provided by previous versions of Google Earth, visitors can
now visit the bottom of the Mariana Trench, learn about ocean observations,
and even discover new places to surf and dive. On the Google Earth homepage,
visitors can take a guided tour of all these new features. This version is
compatible with all operating systems.

Gasp: Corny Exhaust Can Be Harmful to LungsSwitching from gasoline or corn-based biofuels to
cellulosic ethanol--made from the stalks and stems of plants--could have more
health and environmental benefits than previously recognized, according to a
study of different types of transportation fuels. The environmental and health
costs associated with cellulosic ethanol are less than half those of gasoline
and of corn ethanol, the study found.
Anna Davison, MIT's Technology Review, February 17, 2009 ---
http://www.technologyreview.com/energy/22089/?nlid=1782
Jensen Comment
I hope Al Gore gets a big whiff of this.

Despite medicine's inestimable progress over the
past century, surgery can still leave scars that look more appropriate to
Frankenstein's monster than to the beneficiary of a precise, modern
operation. But in the Wellman Center for Photomedicine at Massachusetts
General Hospital, Irene Kochevar and Robert Redmond have developed a method
that has the potential to replace the surgeon's needle and thread. Using
surgical lasers and a light-activated dye, the researchers are prompting
tissue to heal itself.

Laser-bonded healing is not a new idea. For years,
scientists have been trying to find ways to use the heat generated by lasers
to weld skin back together. But they've had a difficult time finding the
right balance. Too little heat and a wound won't heal; too much and the
tissue dies. Eight years ago, one of Kochevar and Redmond's colleagues was
examining pathology slides of cells killed by this kind of thermal healing
when it occurred to him that it might be possible to use just the light of a
laser, rather than its heat.

While the idea of skin weaving itself back together
may sound more like superhero lore than surgical skill, the science is
startlingly simple. The team took advantage of the fact that a number of
dyes are activated in the presence of light. In the case of Rose Bengal--a
stain used in just about every ophthalmologist's office to detect corneal
lesions--the researchers believe that light helps transfer electrons between
the dye molecule and collagen, the major structural component of tissue.
This produces highly reactive free radicals that cause the molecular chains
of collagen to chemically bond to each other, or "cross-link." Paint two
sides of a wound with Rose Benga­l, illuminate it with intense light, and
the sides will knit themselves back together. "We call this nano suturing,"
Kochevar says, "because what you're doing is linking together the little
collagen fibers. It's way beyond anything that a thread of any kind can do."

The benefits of such nano suturing are manifold. In
just about every case, it appears to result in faster procedures, less
scarring, and possibly fewer infections, since it seals openings completely
and leaves no gap through which bacteria can penetrate. This makes it
particularly well suited for closing not only superficial skin incisions but
also those made in eye and nerve operations. In eye surgeries, such as
corneal replacement, stitches that can cause irritation and infection must
sometimes be left in place for months, which can aggravate complications. In
nerve surgeries, damage from scar tissue can decrease the conduction of
neural impulses. "If you put a needle through skin, it's not a big deal,"
says Redmon­d. "But if you put it through a nerve it's a big deal, because
you're destroying part of the nerve."

Light Work The operations take place in a surgical
suite of tile and stainless steel. Min Yao, a surgeon on Kochevar and
Redmond's team, has carted a medical laser up from the lab downstairs. The
instrument is already used for eye, ear, nose, and throat procedures, and
its green light has just the right wavelength for maximum absorption by the
pink Rose Bengal stain. The better the light is absorbed, the more it
activates the dye and the more complete the collagen cross-linking. The box
that generates the laser light is barely larger than a stere­o receiver; a
thin fiber-optic cable snakes out of its side, and it gives off an appletini-green
glow.

A new University of Sussex study shows that,without
being consciously aware, we change our judgment of a person's attractiveness
based on what they do, not their physical characteristics.

Psychologist Dr Beena Khurana set up an experiment
in which participants first rated the attractiveness of a set of faces
presented on a computer screen. They were then asked to detect the presence
of a target dot that appeared on either the left or right side of the
screen. Before the target appeared, either a male or female face appeared
looking either to the left or right. Participants were told to ignore the
faces, but were later asked to rate faces for attractiveness again.

The results showed that faces of the opposite sex
were more effective at directing participants' attention. In other words,
women pay more attention to where men look and vice versa. The faces that
gave accurate cues as to where the target dot appeared increased in
attractiveness, but significantly more for the opposite sex.

Dr Khurana says: "The more traditional finding is
that the more we find a face attractive the more we pay attention to it.
Here we show that we can cause a face to become attractive as a function of
the way it behaves. Note that we changed attractiveness ratings after one
simple session of eye gaze cueing, so imagine what must be going on in real
encounters. We think that perceived attractiveness is both dynamic and
responsive to the behaviour of people."

"Chemistry look what you've done to me," Donna
Summer crooned in Science of Love, and so, it seems, she was right. Just in
time for Valentine's Day, a panel of scientists examined the mystery of what
happens when hearts throb and lips lock. Kissing, it turns out, unleashes
chemicals that ease stress hormones in both sexes and encourage bonding in
men, though not so much in women.

Chemicals in the saliva may be a way to assess a
mate, Wendy Hill, dean of the faculty and a professor of neuroscience at
Lafayette College, told a meeting of the American Association for the
Advancement of Science on Friday.

In an experiment, Hill explained, pairs of
heterosexual college students who kissed for 15 minutes while listening to
music experienced significant changes in their levels of the chemicals
oxytocin, which affects pair bonding, and cortisol, which is associated with
stress. Their blood and saliva levels of the chemicals were compared before
and after the kiss.

Both men and women had a decline in cortisol after
smooching, an indication their stress levels declined.

For men, oxytocin levels increased, indicating more
interest in bonding, while oxytocin levels went down in women. "This was a
surprise," Hill said.

In a test group that merely held hands, chemical
changes were similar, but much less pronounced, she said.

The experiment was conducted in a student health
center, Hill noted. She plans a repeat "in a more romantic setting."

Hill spoke at the session on the Science of
Kissing, along with Helen Fisher of Rutgers University and Donald Lateiner
of Ohio Wesleyan University.

Fisher noted that more than 90 percent of human
societies practice kissing, which she believes has three components - the
sex drive, romantic love and attachment.

The sex drive pushes individuals to assess a
variety of partners, then romantic love causes them to focus on an
individual, she said. Attachment then allows them to tolerate this person
long enough to raise a child.

Men tend to think of kissing as a prelude to
copulation, Fisher said. She noted that men prefer "sloppy" kisses, in which
chemicals including testosterone can be passed on to the women in saliva.
Testosterone increases the sex drive in both males and females.

"When you kiss an enormous part of your brain
becomes active," she added. Romantic love can last a long time, "if you kiss
the right person."

Lateiner, a classical scholar, observed that
kissing appears infrequently in Greek and Roman art, but was widely
practiced, despite the spread of skin disease at that time by facial
kissing. And there was a potential for social faux pas by kissing the wrong
person at the wrong time.

These are from a book
called 'Disorder in the
American Courts' and
are
things people actually
said in court, word for
word, taken down and
now
published by court
reporters that had the
torment of staying calm
while

these exchanges were
actually taking place.

____________________________________________

ATTORNEY: This
myasthenia gravis, does
it affect your memory at
all?
WITNESS: Yes.
ATTORNEY: And in what
ways does it affect your
memory?
WITNESS: I forget.
ATTORNEY: You forget?
Can you give us an
example of something you
forgot?
___________________________________________

ATTORNEY: Now doctor
isn't it true that when
a person dies in his
sleep, he

doesn't know about it
until the next morning?
WITNESS: Did you
actually pass the bar
exam?
_________________________
___________

ATTORNEY: The youngest
son, the
twenty-year-old, how old
is he?
WITNESS: He's twenty,
much like your IQ.
___________________________________________

ATTORNEY: Were you
present when your
picture was taken?
WITNESS: Are you
shitting me?
_________________________________________

ATTORNEY: So the date of
conception (of the baby)
was August 8th?
WITNESS: Yes.
ATTORNEY: And what were
you doing at that time?
WITNESS: getting laid
____________________________________________

ATTORNEY: She had three
children, right?
WITNESS: Yes.
ATTORNEY: How many were
boys?
WITNESS: None.
ATTORNEY: Were there any
girls?
WITNESS: Your Honor, I
think I need a different
attorney. Can I get a
new attorney?
____________________________________________

ATTORNEY: How was your
first marriage
terminated?
WITNESS: By death.
ATTORNEY: And by whose
death was it
terminated?
WITNESS: Take a guess.
____________________________________________

ATTORNEY: Can you
describe the
individual?
WITNESS: He was about
medium height and had a
beard.
ATTORNEY: Was this a
male or a female?
WITNESS: Unless the
Circus was in town I'm
going with male.
_____________________________________

ATTORNEY: Is your
appearance here this
morning pursuant to a
deposition

notice which I
sent to your attorney?
WITNESS: No, this is how
I dress when I go to
work.
______________________________________

ATTORNEY: Doctor, how
many of your autopsies
have you performed on
dead people?
WITNESS: All of them.
The live ones put up too
much of a fight.
_________________________________________

ATTORNEY: ALL your
responses MUST be oral,
OK? What school did
you go to?
WITNESS: Oral.
_________________________________________

ATTORNEY: Do you recall
the time that you
examined the body?
WITNESS: The autopsy
started around 8:30 p.m.ATTORNEY:
And Mr. Denton was dead
at the time?
WITNESS: If not, he was
by the time I finished.
____________________________________________

ATTORNEY: Are you
qualified to give a
urine sample?
WITNESS: Are you
qualified to ask that
question?
______________________________________

And, the
best for last:

ATTORNEY: Doctor, before
you performed the
autopsy, did you check
for a pulse?
WITNESS: No.
ATTORNEY: Did you check
for blood pressure?
WITNESS: No.
ATTORNEY: Did you check
for breathing?
WITNESS: No.
ATTORNEY: So, then it is
possible that the
patient was alive when
you began the autopsy?
WITNESS: No.
ATTORNEY: How can you be
so sure, Doctor?
WITNESS: Because his
brain was sitting on my
desk in a jar.
ATTORNEY: I see, but
could the patient have
still been alive,
nevertheless?
WITNESS: Yes, it is
possible that he could
have been alive and
practicing law.

Forwarded by a guy over 80 who probably tested every one of these
propositions

LOVE MAKING TIPS FOR SENIORS

1. WEAR YOUR GLASSES. MAKE SURE YOUR PARTNER IS IN BED.

2. SET TIMER FOR 3 MINUTES, IN CASE YOU DOZE OFF IN THE MIDDLE.

3. SET THE MOOD WITH LIGHTING. (TURN THEM OFF!)

4. MAKE SURE YOU PUT 911 ON YOUR SPEED DIAL BEFORE YOU BEGIN.

5. WRITE PARTNERS NAME ON YOUR HAND IN CASE YOU CAN'T REMEMBER.

6. KEEP THE POLYGRIP CLOSE BY SO YOUR TEETH DON'T END UP UNDER THE BED.

7. HAVE TYLENOL READY IN CASE YOU ACTUALLY COMPLETE YHE ACT.

8. MAKE ALL THE NOISE YOU WANT. THE NEIGHBORS ARE DEAF TOO.

9. IF IT WORKS, CALL EVERYONE YOU KNOW WITH THE GOOD NEWS.

10. DON'T EVEN THINK ABOUT DOING IT TWICE.

(I SENT THIS IN LARGE TYPE SO YOU CAN READ IT.)
JIM K.

The last tool in the list is probably the only tool your little kids know
by name.

TOOLS EXPLAINED

DRILL PRESS: A tall upright machine useful for suddenly snatching flat metal
bar stock out of your hands so that it smacks you in the chest and flings your
beer across the room, denting the freshly-painted project which you had
carefully set in the corner where nothing could get to it.

WIRE WHEEL: Cleans paint off bolts and then throws them somewhere under the
workbench with the speed of light. Also removes fingerprints and hard-earned
calluses from fingers in about the time it takes you to say, 'Oh sh -- '

ELECTRIC HAND DRILL: Normally used for spinning pop rivets in their holes
until you die of old age.

SKILL SAW: A portable cutting tool used to make studs too short.

PLIERS: Used to round off bolt heads. Sometimes used in the creation of
blood-blisters.

HACKSAW: One of a family of cutting tools built on the Ouija board principle.
It transforms human energy into a crooked, unpredictable motion, and the more
you attempt to influence its course, the more dismal your future becomes.

VISE-GRIPS: Generally used after pliers to completely round off bolt heads.
If nothing else is available, they can also be used to transfer intense welding
heat to the palm of your hand.

OXYACETYLENE TORCH: Used almost entirely for lighting various flammable
objects in your shop on fire. Also handy for igniting the grease inside the
wheel hub out of which you want to remove a bearing race.

TABLE SAW: A large stationary power tool commonly used to launch Wood
projectiles for testing wall integrity.

HYDRAULIC FLOOR JACK: Used for lowering an automobile to the ground after you
have installed your new brake shoes, trapping the jack handle firmly under the
bumper.

BAND SAW: A large stationary power saw primarily used by most shops to cut
good aluminum sheet into smaller pieces that more easily fit into the trash can
after you cut on the inside of the line instead of the outside edge.

TWO-TON ENGINE HOIST: A tool for testing the maximum tensile strength of
everything you forgot to disconnect.

PHILLIPS SCREWDRIVER: Normally used to stab the vacuum seals under lids or
for opening old-style paper-and-tin oil cans and splashing oil on your shirt;
but can also be used, as the name implies, to strip out Phillips screw heads.

STRAIGHT SCREWDRIVER: A tool for opening paint cans. Sometimes used to
convert common slotted screws into non-removable screws and butchering your
palms.

PRY BAR: A tool used to crumple the metal surrounding that clip or bracket
you needed to remove in order to replace a 50 cent part.

HOSE CUTTER: A tool used to make hoses too short.

HAMMER: Originally employed as a weapon of war, the hammer nowadays is used
as a kind of divining rod to locate the most expensive parts adjacent the object
we are trying to hit.

UTILITY KNIFE: Used to open and slice through the contents of cardboard
cartons delivered to your front door; works particularly well on contents such
as seats, vinyl records, liquids in plastic bottles, collector magazines, refund
checks, and rubber or plastic parts. Especially useful for slicing work clothes,
but only while in use.

DAMN-IT TOOL: Any handy tool that you grab and throw across the garage while
yelling 'DAMN-IT' at the top of your lungs. It is also, most often, the next
tool that you will need.

The word moodle is an acronym for "modular
object-oriented dynamic learning environment", which is quite a mouthful.
The Scout Report stated the following about Moodle 1.7. It is a
tremendously helpful opens-source e-learning platform. With Moodle,
educators can create a wide range of online courses with features that
include forums, quizzes, blogs, wikis, chat rooms, and surveys. On the
Moodle website, visitors can also learn about other features and read about
recent updates to the program. This application is compatible with computers
running Windows 98 and newer or Mac OS X and newer.

AECM (Educators)
http://pacioli.loyola.edu/aecm/AECM is an email Listserv list which
provides a forum for discussions of all hardware and software
which can be useful in any way for accounting education at the
college/university level. Hardware includes all platforms and
peripherals. Software includes spreadsheets, practice sets,
multimedia authoring and presentation packages, data base
programs, tax packages, World Wide Web applications, etc

CPAS-L (Practitioners)
http://pacioli.loyola.edu/cpas-l/CPAS-L provides a forum for discussions of
all aspects of the practice of accounting. It provides an
unmoderated environment where issues, questions, comments,
ideas, etc. related to accounting can be freely discussed.
Members are welcome to take an active role by posting to CPAS-L
or an inactive role by just monitoring the list. You qualify for
a free subscription if you are either a CPA or a professional
accountant in public accounting, private industry, government or
education. Others will be denied access.

Yahoo
(Practitioners)
http://groups.yahoo.com/group/xyztalk
This forum is for CPAs to discuss the activities of the AICPA.
This can be anything from the CPA2BIZ portal to the XYZ
initiative or anything else that relates to the AICPA.